What’s good news for investors is bad for would-be homeowners amid a difficult market. In January, First American kicked off the year with a sobering market analysis within its monthly Potential Home Sales Model. The report described millennial demand as the driving force in the housing market even while first-time buyers face a difficult time as rates rise and housing supply remains tight.
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“Millennials are the largest generation in US history, and the bulk of them are aging into their prime home-buying years,” chief economist Mark Fleming wrote. “New household formation, which is the new demand for housing, contributed approximately 165,000 potential home sales compared with one year ago.”
In a separate report on housing starts last month, Fleming’s colleague at First American, deputy chief economist Odeta Kushi, noted the rise of multifamily properties in a tight economy – construction of which made more than a blip on housing starts data: “Today’s housing starts gain was driven by an increase in multi-family construction,” she noted at the time. “Permits and completions were also up for multifamily on a month-over-month basis. Single‐family housing starts in March were 1.7% below the revised February figure, but remain above pre-pandemic levels. Permits and completions were also down month-over-month for single-family homes.”
That report, too, invoked the beleaguered millennial: “Builder sentiment remains higher than pre-pandemic as several long-term trends continue to boost demand for new construction, particularly a growing labor market, demographic tailwinds from millennials entering their prime home-buying years, and a lack of existing-home inventory.”