While each individual home sale is a product of the seller’s and the buyer’s individual circumstances, the behavior of the overall real estate market is more than just the sum of these individual decisions. Larger demographic trends can have a major impact on the market, which is why in this episode of Realty News we discuss two significant segments of the population whose behavior will shape the real estate industry over the next decade – the baby boomers and the millennials. Understanding how these two groups think may be critical to future success in the industry.
Are young renters avoiding home ownership? The new data shows that today’s generation of young Americans is more willing to stay in apartments, even as the cost of rent is quickly outpacing incomes. Across the country, from Boston to Denver, from Miami to San Francisco, rental affordability is reaching what some analysts call “crisis levels.” Still, a recent survey of adult millennials show that they are content with staying out of the housing market, at least for now.
So why is this new generation of would-be homeowners shying away from home ownership? The fact is, many young renters actually want to own a home someday. This rising cost of student debt, coupled with stagnant incomes, make it difficult for this generation to get a foothold into the housing market. With income and prices on the rise, on homes, millennials expect it will be several years before they can make their first home purchase.
Perhaps, they’re taking an example from a previous generation’s real estate woes. A recent study of baby boomers show over half of them expect to stay in their current home through retirement. The recent financial crisis puts a damper on retiree savings. Boomers are also handling much higher mortgage debt than they did before, and, with them, the majority of their investment money going into their homes. It’s really no wonder why they’re choosing to stay put. Only time will tell if either of these trends will falter soon. It could be months or even years before the first-time home buyers are financially secure enough to lock into ownership. But millennials are remaining optimistic about the future.
Boomers, on the other hand, seem a little bit more cautious. Most of those who plan to move are looking to downsize into smaller homes. It’s a smart strategy for those on a tight retirement income, especially as the cost of utilities continues to rise. As always, stay tuned for next week’s Realty News and Updates. I’m Tom Iovenitti, bringing you this Rebo Report. Stay brilliant, and thanks for watching.