High levels of student debt and a restrictive lending environment are often cited as barriers to entry into the housing market for millennials, but Daren Blomquist, senior vice president at Attom Data Solutions, suggests that a limited number of suitable homes on the market and more competition for those properties are also major factors.
In an interview with HousingWire, Blomquist said that Americans are staying in their homes nearly twice as long as they were a decade ago, meaning there are fewer homes being put up for sale.
- Homeowners who recently locked their mortgages in at historically low interest rates are keen to maintain them, preventing many people who bought starter homes from trading up. He added that investors are buying up a lot of the current entry-level inventory and converting the units to single-family rentals.
Blomquist’s comments paint a more nuanced picture of how millennials — many of whom are considering their first home purchase — have been affected by the inventory shortage. There were 12.1% fewer starter homes available in the fourth quarter of 2016 than there were in the fourth quarter of 2015, according to Trulia, which also noted that first-time buyers spent 1.9% more income to snag a median-priced home during the period compared to a year ago.
A shortage of stock for first-time buyers was highlighted in a recent Trulia inventory report, which found that the number of homes for sale targeting the average first-time buyer was down 12.1% in the fourth quarter from a year earlier. Nearly one-third of millennials in an August 2016 Redfin survey said affordability was their primary concern when considering a home purchase while more than 10% cited concerns around saving up for a down payment.
In a survey of 1,000 millennials in December 2016 by Meyers Research, affordability, uncertainty about where to settle down and student debt were equally cited as barriers to entry for millennials into the homebuying market. Older millennials (those ages 27 to 36) were more likely to own than younger millennials (those ages 16 to 26). More than half of millennials who didn't yet own a home said they planned to buy one within roughly five years.
The upward trend in mortgage rates is unlikely to help narrow the affordability gap. A recent survey by Zillow found that rising interest rates are among the main factors impacting the ability to purchase a property for just over half of current home searchers.
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