Both buyers and sellers are equally optimistic about the housing market this spring, even as home values ??reach new highs and mortgage rates increase. “Millennials have shown especially strong increases in job confidence and income gains, a necessary precursor to increased housing demand from first-time homebuyers,” said Doug Duncan, senior vice president and CEO of Fannie Mae. Chief economist at Fannie Mae. Millennials are moving out of their parents’ homes into new households at a faster rate. “Continued slow supply growth implies continued price appreciation and affordability constraints facing millennials and first-time buyers in many markets,” Duncan added.
The prominent edge of the millennial generation is entering the housing market in larger quantities today, with some venturing out of their preferred urban environment to more inexpensive suburbs. Millennials postponed both marriage and parenthood, but that is now changing. Almost half of millennial buyers had at least one child, according to the 2017 Home Buyer and Seller Generational report just released by the National Association of Realtors. That’s up from 45 percent last year and 43 percent two years ago. Children are the main reason for homeownership, which is now sitting near a record low. Only 15 percent of millennial buyers picked up an urban area, which is down from 17 percent last year and 21 percent two years ago. “Millennial buyers, at 85 percent, were the most likely to see their home purchase as a good financial investment,” said Lawrence Yun, chief economist at the Realtors. “These strong feelings bode well for even greater demand in the future as more millennials settle down and begin raising families.”
These numbers would likely be greater if home values ??were not enforced higher by limited supplies of housing, especially starter homes. Nationally, home values ??increased 6.9 percent in January year over year, according to CoreLogic. That is far quicker than income growth but lower than the annual price appreciation in December. This is perhaps a sign that the jump in mortgage rates after the presidential election is cutting into prices. “Home prices continue to climb across the nation, and the spring home-buying season is shaping up to be one of the strongest in recent memory,” said Frank Martell, CEO of CoreLogic. “A potent mix of progressive economic recovery, demographics, tight housing stocks and continued low mortgage rates are expected to support this robust market outlook for the foreseeable future.”
The sturdiest comes in confidence from those who say it is a good time to buy a home, but also a reaction among sellers, according to Fannie Mae’s report. More Americans are feeling positively about employment as well, with fewer assuming to lose their jobs. They are also recording somewhat higher household income, and an increasing number expect home values ??to rise. Those who expect mortgage rates to fall, however, remained unchanged for the third straight month.