Everyone keeps waiting for Millennials to jump into the housing market and save the day, but new data shows we should not hold our breath.
It’s the big question on many an agent’s mind – when will Millennials take the torch from Baby Boomer and Gen X consumers and march the housing market out of its current rut?
Speculation has been prodigious that such a scenario is right around the corner, but unfortunately, fresh data from the Census Bureau suggests that we may be waiting a bit longer for all our Millennial-driven dreams to be realized.
Per some typically excellent analysis from Trulia, here are three signs that we’re not out of the woods yet:
1. Still in the Basement – First things first, the basement-dwelling Millennial is still a reality in 2014, and pending any shockwave of change, it seems they’ll be staying there for some time. Now in 2014, 31.1 percent of Millennials still live with their parents; that’s basically unchanged from 31.2 percent in 2013, but down ever so slightly from the peak of 31.6 percent in 2012. Here’s a graph from Trulia showing the progression:
2. Headship Rates Unchanged – Equally important is the nation’s “headship rate,” the phrase Trulia uses for the percentage of households headed by individuals (as we’ve written before, it’s a more reliable measure of housing than the enormously flawed homeownership rate). In 2014, the headship rate for 18-34 year olds fell to 36.6 percent, down from 36.9 percent in 2013 but up slightly from the 36.5 percent of 2012. In other words, even if Millennials escape the basement, they’re not forming their own households, and are likely moving in with others. Here’s a graph on the headship rate:
3. Homeownership Down – As you can imagine, with those two aforementioned stats trending down, the published homeownership rate for 18-34 year olds is also down in 2014:
So, what does all this mean for housing? Simply, that housing is still not forming as many households as it should in a typical economy.
According to Trulia’s projections, there should have been 1.2 million new households formed from March 2013 to 2014, but the Census Bureau’s latest stats show formations of just 425,000 in that time – meaning, of course, that homebuilding, existing-home sales and all those lovely complementary stats will not show much progress; after all, if people are not moving into their own households, it’s mighty difficult to build them a new home or sell them an existing home, and even 2014’s weak household formation, noted Trulia’s Chief Economist Jed Kolko, has gone overwhelming to rental units (a fact confirmed by recent Freddie Mac research).