They may have waited longer than previous generations, but millennials are now showing a strong desire to become homeowners, especially older millennials. That is strengthening overall demand for the limited supply of homes for sale, and consequently reigniting the fire under home prices.
Home price gains had been shrinking over the last year, but the increases turned higher again this summer. Home prices were up 3.6% in July compared with July 2018, according to CoreLogic. That is stronger than the 3.4% gain in June. CoreLogic is now predicting an even larger 5.4% annual gain by July 2020.
“Sales of new and existing homes this July were up from a year ago, supported by low mortgage rates and rising family income,” said Frank Nothaft, chief economist at CoreLogic. “With the for-sale inventory remaining low in many markets, the pick-up in buying has nudged price growth up. If low interest rates and rising income continue, then we expect home-price growth will strengthen over the coming year.”
The housing market cooled significantly last fall, after mortgage rates surged higher. The supply of homes even began to rise slightly during the winter and spring, and then rates began falling again. That brought buyers back to the market, especially older millennials.
More than a quarter of the nation’s largest generation said they were interested in buying a home in the next 12 months, according to a survey conducted by CoreLogic with RTi Research during the first half of this year. The problem is there is still precious little for sale, and supplies are falling once again. At the end of July, the inventory of homes for sale was nearly 2% lower compared with a year ago, according to the National Association of Realtors. There was just a 4.2-month supply of homes for sale. A six-month supply is considered a balanced market between buyers and sellers.
“A growing number of millennials are expressing an interest in buying homes, reinforcing the theory that this cohort is continuing to engage within the housing market,” said Frank Martell, president and CEO of CoreLogic. “But, with so few homes available for sale, the imbalance has created an affordability crisis that is getting worse every day. Demand exceeds supply and we’re unsure of when the two will balance out.”