With the U.S. employment rates on the rise and apartment rents increasing, millennials are turning to the busy and competitive U.S. homebuying spring season and trying to purchase a new home.
According to Bloomberg author, Prashant Gopal:
Before beginning the hunt for their first house, Tennessee residents Brittany and Craig Murphy pared their student debt, saved for a down payment and got an income boost from her new job. The major hurdle was what came next.
In the last month, the couple lost two bidding wars on Nashville homes to competitors willing to pay more than 10 percent above the asking price.
“I was not expecting the actual finding of the house to be the difficult part,” said Brittany Murphy, a 26-year-old Web designer whose husband, 27, is a software developer.
Many house hunters are facing difficulty in purchasing a home by the lack in homes being built as well as facing limited inventory and finding a home in in-demand cities like Nashville, Tennessee.
Per Bloomberg, Doug Duncan, chief economist of Fannie Mae estimates the U.S. single-family home prices will climb 5% in 2016 while sales will increase by 3%.
“Affordability is a challenge this spring,” Duncan was quoted saying. Prospective buyers “would have gotten their credit in shape and they’ll have a job. But they will be frustrated because, in their market, there simply won’t be affordable homes.”
While the majority of first time homebuyers are millennials, people at the age of 35 and below account for 35% of buyers in the past 12 months through June 2015. It increased 28% three years earlier.
While Nashville (the market the Bloomberg article mentions) is currently in the top 20 hottest housing markets in February, according to the Greater Nashville Association of Realtors, the median for single-family home prices in February jumped 14% from a year earlier to $235,000.
Bloomberg also states Ralph McLaughlin, chief economist of Trulia says buyers are facing weaker affordability as home prices climb faster than incomes.
“I’m concerned about the current ability of the millennial generation to buy a home,” McLaughlin was quoted saying. “Right now, inventory pressures are keeping them from doing that.”
There’s only one way to boost inventory — by building more homes. But homebuilders, seeking larger profit margins, have focused on pricier offerings rather than smaller starter homes. And many homeowners aren’t selling because they owe more than their properties are worth or they can’t afford to trade up.
Construction is picking up. Starts for single-family houses, still anemic by pre-crash standards, rose to an 822,000 annualized rate in February, the most since November 2007, the Commerce Department reported Wednesday.
Starter homes made up 27.7% of the market’s inventory through February this year, down from 28.7% a year earlier, McLaughlin said. That’s the smallest share for the start of the year since 2012, he said.
According to estimates released jointly by the U.S. Census Bureau and the Department of Housing and Urban Development, home starts rose 5.2% and increased with a seasonally adjusted annual rate of 1.18 units. An improvement from January’s estimate of 1.12 and is 30.9% above February 2015’s rate of 900,000.
According to Bloomberg, Realtors group research economist Scholastica Cororaton, wrote in a blog post on March 7. “On a positive note, the slowdown in demand from foreign buyers may help ease the tightness of supply in the market.”