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Trends: Will Millennials Buy Homes?

Noah Nehlich on Oct 22, 2014 1:30:00 AM

When I think of the housing market, or the economy in general, this quote comes to mind:

“I can't change the direction of the wind, but I can adjust my sails to always reach my destination.” --Jimmy Dean

Whatever the economy does, in the next 5 years the wind will give your business a boost. Here's why:

First, some interesting data for you to consider: in 2013, single family construction rose 15%, home sales rose more than 17%, and “home values rose in 97 of the 100 largest metro areas.” These figures suggest that the housing market is recovering.

Will Millennials Buy Homes? Economist Bill McBride’s look at trends pinpoints why, even though many young people are choosing to rent currently, “the demographics will be more positive for home ownership.”

One big reason why Millennials will finally start buying houses, according to McBride? “As families have babies, they will tend to buy homes.”

He notes that while “the number of births slow[s] or decline[s] during tough economic times,” the improving economy suggests “that appears to be over.” Plus, since many “women are waiting longer to have babies,” “we should expect a baby boom in a few years as the largest cohorts move into the 25 to 34 years old age groups.”

That’s exactly the age group when many people first buy a home.

According to Harvard researchers, even with the economic decline in recent years, “most other characteristics of first-time homebuyers have changed little over time.” When do most people start buying homes? “Between the ages of 25 and 34.” Which is the LARGEST demographic!

McBride’s analysis notes that normal lifestyle changes—like growing families—will be what drives people to buy houses. There is “pent-up demand” for homes amongst young adults, for exactly the reasons McBride highlights. Millennials have begun to move “into the age age group where household formation rates normally peak” and “demographic forces alone will drive household growth of 11.6-13.2 million in 2015-2025,” with Millennials making up “fully 24 million new households,” and “driving up demand.”

What does this mean for your business?

  • Trends in housing are showing “notable increases in construction, home prices, and sales.”
  • "All signs indicate strong momentum building in design activity, which is expected to produce solids gains in construction later this year and into 2015.” (source: AIA)
  • “Younger groups actually [are beginning] to see enough income growth to make the leap to homeownership.” (source: National Association of Home Builders)
  • "Prime working age group has started to grow again” (source: Bill McBride)

Bottom Line: As the largest demographic reaches home buying age, they will buy more houses than the last three generations. Which means, your Swimming Pool and Landscape business will be pushed in the right direction over the next 5 years.

What about in your market? Have you noticed growth this year?

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