Can Millennials Take Over a Tough Housing Market in 2022?
The Federal Reserve says that Generation X currently holds 41.5% of home mortgages in the second quarter of 2021, followed by baby boomers with 27.3% and then millennials with 26.7%. However, a new study from Realtor.com forecasts a generational shift with more than 45 million Millennials hitting “the prime first-time home buying ages of 26 to 35 in 2022.” Buying a home can be complicated, especially for first-time homebuyers , and the study says 2022 will be even tougher as demand outstrips supply and home sales hit an expected 16-year high. But while Millennials have the numbers, can they take over a tough first-time homebuyers market in 2022? Let’s take a look at the study.
If you’re considering buying a home in 2022, a financial advisor could help you create a financial plan for your needs and goals.Housing Markets in 2021 and 2022
While mortgage rates and home prices are expected to rise in 2022, Realtor.com says that a growing economy, a strong employment market and workplace flexibility will empower many homebuyers to buy their first homes. And with rents forecasted to grow 7.1% in 2022, outpacing for-sale home prices growth of 2.9% in the same year, this could be a great opportunity for Millennials who are in the prime age of a first-time homebuyer (26 to 35). But the study also shows that the path to buying a first home will not be easy.
Realtor.com says that home median sales prices appreciated by 12% from 2020 to 2021. And while there were six million home sales, the for-sale inventory of existing homes was actually down 18%. The study also found that in that year, the number of starts on new single family homes went up 15%, and the overall homeownership rate stood at 65.5%.
And for 2022, the online real estate firm forecasts that existing home median sales prices will go up 2.9%, and the number of existing home sales will also rise 6.6%. Additionally, the firm predicts a small bump of 0.3% in the inventory of existing homes, a 5% jump in housing starts for single family homes and a home ownership rate of 65.8%. That sales growth would represent a 16-year high for home sales nationwide.
All of this taken into account, affordability will still be an important consideration. While millennials turning 40 are among the highest wage earners when compared with older generations at their age, they hold much less wealth than those age groups.
For a comparison, using data from the Federal Reserve , a boomer who was age 32 in the second quarter of 1990 owned 21.4 of household wealth in the U.S., while Gen X-er at the same age only owned 3% in the second quarter of 1997 and a millennial owns 5.6% in the second quarter of 2021.Demographic Shifts in the Housing Market
The Realtor.com study points out interesting demographic shifts that will define the housing market in years to come. Once change shows that Hispanics now make up more than one in 10 recent homebuyers, which tracks with overall population shifts in the country.
Another shift poises Millennials homebuyers as a driving force in the market. More than 45 million Millennials will be within the prime ages between 26 and 35 for buying their first home in 2022. Though, as noted above, with the stock of homes expected to go up slightly, this glut of millennial buyers will likely keep demand and prices high.
First-time homebuyers should also note that as a direct result of the ongoing COVID-19 pandemic, there is an increase in the number of people working from home. And this has a big impact on the areas where homebuyers are looking to purchase.
With living close to the office no longer of concern for many people, buyers are able to look at a wider range of locations. Survey data shows that 19% of sellers are moving because they no longer need to live close to the office, while in spring of 2021 it was just 6%.
That said, this also means Millennials will have to compete with other homebuyers who are looking for more space so they can have a home office or just generally more space for a place that is now for both living and working. Consequently, the demand for 2,000 square foot single-family homes is expected to outpace new construction, and this will compel many buyers to pay more or sacrifice space.Bottom Line
The housing market in 2022 is expected to be a good one for sellers, but not one where buyers can’t find something that works for them. Inventory will likely go up slightly, while prices will increase as well, driven in part by more than 45 million Millennials moving into the homebuying phase of their lives. But as more people move farther from city centers to work remotely, they could face competitive markets where they have to pay more or give up space.Homebuying Tips
- A financial advisor can help you get ready to buy a home. Finding a qualified financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three financial advisors in your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now .
- When you buy a home, don’t forget to factor closing costs into your total costs.
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