Two demographic groups at the opposite ends of the generational scale may just be poised to take the real estate boom to new levels and for different reasons.
The much beleaguered millennials who have had to deal with seven years of the worst economic “recovery” – if you can call it that with a straight face – since WWII, staggering student loans, low-paying jobs and skyrocketing rental costs may be poised to finally graduate to the ranks of homeowners.
Age-wise they are in the sweet spot as the oldest of them reach their mid 30’s to settle down and buy homes. Financial-wise, that’s another story and, like it or not, it will depend to a very high degree on the Donald Trump economic policies. Prima facie the Trump economic plan looks to have the right ingredients to pull this off: lower income taxes, lower corporate taxes, eliminate ridiculous layers of capricious regulations and offer incentives to keep jobs in America and repatriate capital. Yes, exactly the opposite of what we’ve had in the past eight years. To what extent will this succeed we’ll find out very soon, but there’s every reason to remain optimistic!
There are other factors that may also contribute to millennials buying homes in the near future. As pathetically anemic as the economy has been in the past eight years, of the jobs that were created, more of them were created for 25- to 34-year-olds. This may be only a function of a complete collapse of the entry level job market for positions requiring college degrees, but nonetheless, it is what it is. If this trend continues and salaries start to increase, the buying power of millennials can reach that of home ownership. This should continue to apply demand pressure on entry level homes and will lead to developers providing additional supply.
At the other end of the generation scale, Baby boomers, the oldest of whom are entering their late 60’s, are also looking to move as they reach well into their retirement years.
In the past, we could count on people in these age groups to move to “adult communities” and retirement type homes, however this is changing significantly with many opting to stay closer to families.
Some contend that retiring boomers will look to downsize as empty nesters have done in the past. However, that assumption too has been challenged as we have seen baby boomers purchase the biggest homes of their lives! Perhaps with grandchildren on the way they want big houses to accommodate big families and encourage them to spend more time with the grandparents.
Whatever the boomers will buy, one thing is for sure – it will probably not be their first home and so they’ll need to sell their properties. Many have put off doing that while waiting for real estate values to recover and if they decide to take action on both the selling and the buying side, it may prove an incredibly powerful engine for the real estate industry at many levels.
With the selling and buying season just a couple, maybe three, months away we may be getting some answers very soon.
By Chris Hinova