Most Millennials are still living in rentals or with parents or with friends. Is it time to buy for millennials? We know that it has been tough on them, they have more debt than previous generations. The college costs have risen, by a lot! So student debt is a killer for this generation. Luckily, the cost of mortgages is still very low with rates of under 4% available. Some good news on the horizon is that many of the multi-family developments are seeing a decline nationwide.
Serious housing shortage
The data from the National Association of Realtors last week was that new homes being built has risen by 9% nationwide. But with the average new home taking anywhere from 90-120 days to complete, they are not building enough to keep up with demand.
“It’s a very positive signal that we’re going to have more new construction in the months ahead,” says realtor.com’s chief economist, Jonathan Smoke. “We haven’t been building enough to keep up with population growth, and that’s why we’ve been seeing significant increases in both rents and home prices.”
Apartments and Condos mixed data
In another encouraging sign for the super tight (and therefore super expensive) rental market was a jump in the number of permits issued in September for buildings with five or more units, typically condo and apartment buildings. They increased 21.5% from August and 19.4% from a year earlier.
Look at some of the hotter markets, Seattle, San Francisco, New York, there are fewer condos being built. The existing supply has not been absorbed. In states like Florida, and Jacksonville, we are seeing more development of apartment complexes and discussions of apartments going to condo due to a nice growth rate in the city. Also there have been cancellations of buildings, such as The Beacon and the San Marco development that featured Publix as the main tenant. Financing is available for the projects, but they demand has not been as hot in Jacksonville as in other places. A possible answer for, time to buy for millennials?
Demand rising for decision makers
Where is the demand coming from? Well, remember all those “investors” who purchased homes at a discount in 2008, 2009, 2010? They still have them, or are slowly selling into the market, but not fast enough. So as the economy improves, there is still a HUGE need for housing. The Millennials are in good company with people needing to see for their jobs, people downsizing and the investor. Its a very challenging market out there for first time home buyers!
As the economy improves and we move on past the election all the people who have been on the sidelines will come flooding out. People pause during elections, they stop spending their discretionary income, they really clamp down and that is what we have seen this fall. Gas prices have fallen, while oil prices have risen. Insurance rates have fallen, some grocery items have fallen, the demand has not been there. But it will not last for long.
Look for a pop in November and December
The Holidays seem to bring out more and better data. Folks are happier to shop, spend money and will be in higher spirits, no matter who wins the election. Interest rates are forecast to rise in December by 25 basis points. However, the markets are looking for this because banks have nothing to offer savings accounts. Even people saving need to see an increase in the cost of their money for banks to use to provide loans too. So a rise in the rate will be good for all, and it shows the economy is improving.
Act now, because the Spring 2017 will be hard too
Think Spring 2017 is the ideal time to buy? Think again. NAR forecasters are already saying this is a tight market, and Spring 2017 will not get any better. In fact, prices will likely rise between now and Spring 2017. If you see a house you like, make sure you are ready to buy, then and there, because the odds are good that the house will not be there in a week or two. Holidays make no difference other than there is typically LESS on the market.
If you NEED to buy, make sure you are qualified and have a good Realtor who can show you options in the market. 2016 has been a good year for real estate, but 2017 looks like its going to be tighter for buyers. If you are a seller, make SURE you have a place to go. Otherwise you may be stuck renting for a long while, if you do not have a plan. This may indeed be time to buy for millennials.