Dive Brief:

• Homeownership rates are poised to rebound next year from recent historical lows as a greater proportion of younger, first-time buyers enters the market, according to a new report from real estate listing website Zillow. First-timers accounted for nearly half of all homebuyers this year, and millennials accounted for more than half of that group. 

• Home prices are expected to continue to rise, with values expected to increase 3.6% in 2017 after climbing 4.8%, so far, in 2016. Rents should soften while incomes grow, improving the affordability of renting.

• In cities, development will center on properties with smaller footprints proximal to public transit and amenities. Overall, however, the number of people driving to work increased for the first time in a decade as they seek more affordable housing in the suburbs, a trend that is expected to continue.

Dive Insight:

The housing industry is set to see younger, first-time homebuyers returning to the market in greater numbers next year, reversing a post-recession trend, as homebuilders look to tap into pent-up demand among this group.

Sales of previously owned homes neared their highest level in 10 years in October, according to data released yesterday, with strong turnout from first-timers (33%), who in September took their largest share of sales (34%) in more than four years.

Meanwhile, homebuilders and lenders alike are seeking to appeal to this group. Earlier this month, property data provider CoreLogic announced plans to partner with RentTrack to offer an online rent payment system through which residents can build credit. And SoFi Lending Corp. and Fannie Mae launched a new loan option that lets homeowners refinance their mortgage and student debt together.

Builders like Meritage Homes, LGI Homes and D.R. Horton are developing home lines designed to meet the needs of price-sensitive first-time buyers who value features like energy efficiency and smart technology.

There’s still room to grow. U.S. homes priced below $200,000 took a 19% share of sales in 2015 compared to 38% in 2011, according to The Wall Street Journal, though builders are increasingly looking to smaller footprints that tend to have a lower price tag. But with home prices steadily climbing this year and the recent uptick in mortgage interest rates, many would-be homeowners remain hesitant to buy in. 

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