Millennials are now the nation’s largest demographic group at more than 70 million strong, and their purchasing power and appetite for homeownership is growing. Recent data from the U.S. Census Bureau confirm that the homeownership rate of millennials – at 36% – had the largest gains among all age groups in 2017. The National Association of Home Builders reports that millennials are poised to drive sales of new single-family homes.
“Millennials are recognizing the benefits of homeownership and are eager to buy their first homes,” said NAHB Chairman Randy Noel in a news release. “And contrary to conventional wisdom, this generation is in the market for single-family homes in the suburbs as they look ahead to raising their families.”
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To meet this new demand, home builders are ramping up construction, but not quickly enough. Rising building costs and limited lot space are hampering their ability to cost-effectively produce single-family homes that are affordable for first-time buyers.
Townhouses tend to offer a more affordable option for younger, first-time buyers who are willing to compromise on space for a starter home. New townhome construction in 2017 was up 7% from 2016.
Overall, however, sales of newly built, single-family homes flattened after dipping a slight 0.6% in February to a seasonally adjusted annual rate of 618,000 units, according to the U.S. Department of Housing and Urban Development and Census. This comes after upward revisions of new home sales for the previous three months.
The economy is still growing, and wages are rising, which will likely continue to drive housing demand throughout 2018, NAHB said. Its analysis of the Census Bureau’s Housing Vacancy Survey shows that the number of homeowner households rose by 1.5 million in 2017. Meanwhile, the number of renter households fell by 76,000.