For millennials buying a starter home, times are tough.
The growth rate in the price of the cheapest previously owned homes has outpaced all other price tiers, according to Bloomberg. The growth rate gap between the most expensive and the least expensive homes hasn’t been this wide since 1983.
The August price, according to data from CoreLogic Inc., is 5.9 percent higher than the peak reached in October 2006 before the recession.
Millennials who want a smaller, more affordable home don’t have a robust supply to choose from. Bloomberg notes that builders aren’t catering to younger homebuyers — they’re looking for homebuyers who want to spend more. As builders chase a higher profit margin, that leaves those of more modest means out of luck.
The price growth rate isn’t the only problem.
“The housing markets that are struggling with tight inventory still appear to remain tight as most of the new construction has focused on multi-family units for the rental market,” Trulia notes.
The rental market has gotten more attention, which pulls away from the diversity within the buying market. Until builders pivot their attention to modest profit gains, housing on the lower end of the market will be tight for millennials.
The relatively low numbers of millennials looking to buy might hurt that. Renters remain more numerous than homeowners until ages 30-34, according to the Census Bureau’s American Housing Survey.
Age is a double-edged sword for housing. Millennials are set to become the largest generation in America, but high demand in the housing market, powered by millennials’ parents and retiring Baby Boomers, has captured the attention of the real estate market. The successful follow the money.
Even with higher prices, though, it’s smarter for millennials to buy rather than rent in most places. Even if it’s more expensive to buy now than it could be in the next 10 years, that seems to be a reflection of a bad time to come of age in America more than anything else.
