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Millennial Employment Stands Out in Housing Barometer

by James F. McClister

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Trulia’s 2014 fourth quarter Housing Barometer reported that, on a scale of 0 percent (recession levels) to 100 percent (pre-crisis “normal” levels), all elements of the five-measure gauge suggest a trending towards a healthier and more balanced market.

Through a close monitor of existing-homes sales (excluding distressed), home prices, delinquencies and foreclosures, new construction starts and the employment rate among 25 to 34 year olds, Trulia’s quarterly Housing Barometer provides a brief but telling snapshot of the market as it turned the corner into 2015. And according to the report’s author and Trulia Chief Economist Jed Kolko, the industry is in good shape.

“All five Housing Barometer indicators made good progress over the past year and also improved from the previous quarter,” he said, making special mention of gains in employment and prices, as well as the delinquency plus foreclosure rate.

The Five Metrics

As Kolko pointed out, each barometer metric saw healthy increases, but some gains were more pronounced than others.

Existing-home sales ebbed ever closer to normal levels, rising 2 percent quarter-over-quarter and 9 percent year-over-year.

Home prices took a big jump, moving from 66 percent in Q4 2013 on Trulia’s barometer to 82 percent in Q4 2014.

Quarter-over-quarter, delinquencies and foreclosures climbed a modest 2 percent, compared to a 17 percent jump year-over-year.

New construction is slowly climbing its way towards normalcy, moving up 4 percent quarter-over-quarter and 7 percent year-over-year.

Employment rates for 25 to 34 year olds experienced the most significant gains, rising 20 percent year-over-year and 7 percent quarter-over-quarter.

Millennials to the Rescue

Last year was, in many ways, a practice in recuperation for real estate. The early months of 2014, which came off a record-breaking 2013, saw things slow for most areas, and some even took a few steps back. But as the nation found its footing and momentum picked up, indicators such as price and sales took off, and soon the neighboring dominos started falling – intermittently, of course.

Perhaps the most telling indicator, however, has been employment, which has seen huge gains in the last 12 months.

“The three-month average in December showed that 76.3 percent of adults age 25 to 34 were employed,” Kolko said. “At 46 percent back to normal, that’s near the halfway mark.”

The particular importance of the Millennial employment rate is rooted deeply in future home sales, as young people represent the new crop of homebuyers and, as Kolko pointed out, “the housing recovery depends on Millennials getting jobs.”

In 2015, with job prospects opening up as a result of retiring Baby Boomers, Millennials are well positioned to improve their economic standing and wade into the realm of homeownership.

However, not every indicator is as promising, Kolko admitted, pointing to new construction starts and their slow pace, compared to the barometer’s other metrics, as a potential market hindrance over the next year.

“Single-family starts are running far below pre-bust levels,” he said. “As a result, starts overall are just past halfway back to normal, lagging behind the recoveries in sales, prices and the delinquency-plus-foreclosure rate.”

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