Houses built during the mid-2000s housing boom are holding their value better than existing homes from that period, with homes built in 2003 appreciating 0.7% per year through 2013, compared to 0.5% annual appreciation for existing homes during that time, according to Zillow.
The slowdown of new construction during the recession disrupted the typical cycle of naturally affordable housing, in which the presence of higher-end new construction pushes existing-home prices down, which has reduced the number of affordable options for first-time buyers.
The housing crunch also shifted the typical rate of value distribution. While the value of a 1997-era home once would have fallen an average of 1 percentage point annually, it decreased by 1 percentage point overall from 2009 to 2016. The result is a further constriction of inventory affordable for younger buyers.
The housing recession stalled traditional move-up buying patterns, with Americans staying in their homes longer than they may have planned and therefore depressing the availability of more affordable starter homes for first-time millennial buyers already constrained by student loan debt and rising expenses.
The home-value appreciation trends outlined by Zillow are further exacerbating the already-tight market for affordable homes.
Even rising incomes aren’t helping, as home prices also are increasing, according to the latest CoreLogic Home Price Index, although availability varies from market to market. All of this comes at a time when for-sale housing inventory remains tight. A shortage of skilled-workers nationwide and rising material prices are also raising construction costs, which builders must decide whether — and how — to pass along to buyers.
The homeownership rate among 18- to 34-year-olds is at a 30-year low. Experts vary in their predictions as to when millennials will not only be able to buy but also when they will want to. The general consensus is that they will do so eventually, just on a later schedule than previous generations.
For more housing news, sign up for our daily residential construction newsletter.