H.OME ownership It was a long dream for many millennia. But after years of postponing marriages, delaying paternity and fighting student debt, the so-called Generation Rent is finally emerging as a major driver of the housing boom in the rich world.
Commonly defined as those born between 1981 and 1996, the millennia produced the largest generation of all time in America. Since most of them have reached the top of their purchases, they are becoming a force to be reckoned with in the property market. In America they represent the fastest growing segment of buyers and are responsible for more than half of all mortgage applications in the last two years. CoreLogic, a research firm, estimates that millennial homes were responsible for more than 60% of real estate sales growth in 2020. British millennials are now more likely to own their home than rent. And in Canada, about half of adults aged 25-35 bought property.
More millennia will reach the age of 32, which is the average age for first-time buyers, in the next two years than at any other time. If additional demand is met, American builders will have to build 2 million homes each year, according to Jefferies, an investment bank. This compares with the start of 1.6m housing in 2021.
But the frenzy of buying a home reflects more than millennia, just aging. After the lockdown during the epidemic and other sweeping changes in daily life, a growing number of people over the millennium want a larger family home with more dedicated office space for remote work. Those who already own the property are doing business for more space. This, in addition to reducing stamp duty, helped push the number of buyers in Britain for the first time in almost two decades in 2021 for the first time. Some people have come up with a plan to buy 7 Nearly one-third of young adults surveyed by a real estate firm called Clever Real Estate in the U.S. say the Covid-19 has pushed them toward home-hunting before planning.
The millennium push is reshaping the property market. For one thing, millennials have been switching flats for family homes. By 2021, most young buyers in America have bought a single-family home. Many are leaving the city or doing business in expensive areas for cheap. Young adults are less attached to London, says Lucian Cook, a property company in Seville. In small towns like Manchester, Glasgow, Edinburgh and Bristol in the UK, the number of millennia is growing much faster than in Big Smoke.
Remote work is also opening up more affordable places to live. Shoppers flock to sunbelt hotspots like Phoenix and Tampa in the US. Zillow, a property company, estimates that a typical tenant in San Francisco would have to set aside 2.4% of their income for six or seven years to save enough for a 20% deposit at a starter home in Austin or Phoenix. For a similar property in San Francisco they would have to be preserved for more than 70 years.
Will millennial home ownership continue to power the market? The growing number of millennia will keep pace with the years of their purchase, and flexible works can make cheaper areas more attractive. The question is what will be the affordability. Rising interest rates in many places: The Federal Reserve expects interest rates to rise six more times this year. This could dampen demand and increase mortgage-service costs. Rising interest rates in the 1980s, for example, plummeted the housing market just as baby-boomers peaked at their purchases. The difference now, though, is that rates are lower than historical values and are expected to rise only gradually.
Severe constraints on housing supply, however, could mean that purchasing power is suppressed. Lack of labor and materials will make it difficult for builders to build new homes in the market. Record-low inventory and fierce bidding battles can mean fewer homes to choose from For some millennia, the dream of owning a home may still prove out of reach. 3
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This article is published in the Finance and Economics section of the print edition under the title “Age is coming”