Millennials are feeling slightly better about themselves, which is making pollsters feel even better about the future of the housing markets. Just how long the next generation will take to get serious about the process of home buying still makes experts nervous.
Overall, Americans are more confident in their housing market than at the start of the year, according to the latest Zillow® Housing Confidence Index (ZHCI)i. The headline U.S. ZHCI rose to 64.2 over the summer, up from 63.7 in January.
Consumers’ expectations for more modest home value growth going forward are in line with Zillow’s predictions for slower home value growth over the next year. The Zillow Home Value Forecast predicts home value growth of 3.1 percent through next August, down from 6.6 percent over the past year.Overall, housing confidence is higher among homeowners than renters, likely owing to historically high rents and favorable home buying conditions.
Among millennial renters (aged 18-34), 82 percent said they were confident or somewhat confident that they will be able to afford to own a home someday, compared to 64 percent of Generation X renters (those aged 35-49) and just 48 percent of Baby Boomer renters (aged 50-64). Millennials overall were also far more optimistic about future home value appreciation. One-third of millennials (33 percent) said they expected home values to rise more than 6 percent per year over the next decade, compared to 21 percent of Generation X and just 15 percent of Baby Boomers.
Another survey released earlier this month portrayed a rosier portrait of young adults’ home buying intentions.
According to a study by Frank N. Magid Associates, a full 64 percent of Millennials surveyed said it was “very important” to have an opportunity to own their own home. Some eighty-four percent of 18-34 year olds who are currently renting say that they intend to buy a home even if they can’t currently afford to do so.
Glenn E. Crenlin from the Runstad Center for Real Estate Studies at the University of Washington believes that “what we’re looking at in terms of the Millennial Generation is likely only a delay in homeownership of three to five years, not a long-term trend away from homeownership itself.” He cites census data from the American Community Survey that shows a significant increase in homeownership among Millennials as compared to Baby Boomers when they were at the same age that Millennials are now. “While 900,000 households in the Millennial Generation [now] own their own home, only 500,000 Baby Boomer households owned their own homes at the same point in their lives.”
Commenting on the Zillow study, Zillow Chief Economist Dr. Stan Humphries said, “It’s heartening to see younger renters express so much confidence in their ability to buy a home in coming years, because today’s renters by necessity are tomorrow’s buyers, Cynics might argue that these results represent no more than youthful exuberance, or perhaps some naiveté, but that’s missing the point. We need this generation to be confident and wanting to buy, regardless of the difficulties they face. And there are difficulties, including saving for down payments in the face of high rents and high student debt burdens, uncertain job prospects among younger workers and limited entry-level home inventory. But optimism is a necessary first step, and indicates a desire among a very creative generation to find creative solutions that will enable them to achieve homeownership.”
In some respects, millennials’ views toward housing may be more conventional than older generations. Almost two-thirds (65 percent) of millennials said they agreed with the statement that owning a home is necessary to living the “good life” and is central to the American dream, compared to 56 percent of Generation X and 55 percent of Baby Boomers. Roughly 46 percent of millennials said they agreed with the statement that owning a home is necessary to be a respected member of society, compared to 38 percent of Generation X and less than a third (30 percent) of Baby Boomers.
“Although strong aspirations are no substitute for financial capacity or creditworthiness on a mortgage loan application, this feedback from millennial renters is significant because it confirms that they bear relatively few psychological scars from the housing bust, and because the attitudes of this generation will drive housing trends in the decades to come,” said Pulsenomics Founder Terry Loebs. “Regarding the outlook of renters across all generations, in 14 of the 20 major metro areas in which we conduct our research, a majority of renter households don’t believe that right now is a good time to buy a home. However, a larger, two-thirds majority of these 3,764 renter households said that owning a home someday is a specific goal that they are determined to reach, or something that they think about a lot.”