As an experienced real estate broker I have always been intrigued by the those entering the marketplace. The Millennials (those born between the early 1980′ and the early 2000’s) are now in the marketplace for their first home as well as step-up.
At the same time, the Baby Boomers i.e. those born between 1946 and 1964 are in the process of transitioning to smaller, less maintenance dependent options as some are becoming or are empty-nesters and similar. Just look at the explosive growth of the Cherry Creek neighborhood.
Upon reviewing some industry news I came across the following statistics:
- At present, almost 60% of the population is under the age of 55.
- 66%+ of Primary Home Equity is owned by those over the age of 55.
- Of the 66% noted above, 52% of them have no mortgage i.e. their homes are free and clear.
- For those under age 55 who own a home, only 19% own their homes free and clear.
While the above should not be striking as older folks have been in their homes longer and have experienced record equity appreciation (even when factoring in the recent recession), yet there is concern on the horizon.
Will the next generation be able to afford the homes of their parents i.e. the Baby Boomers?
Will there be a dramatic shift in housing styles towards multifamily and other more affordable options?
While development will continue in exurban areas providing affordability will our next generation of buyers remain in the city and close-in suburbs trading affordability for convenience?
What I have noticed since the great recession is an appreciation for Denver’s inner-city neighborhoods. While the old adage will always be true it’s is all about Location, Location, Location we are witnessing Millennials change the housing landscape by gentrifying close-in neighborhoods, rejecting the notion one must be in a single-family detached home and more recently the willingness to rent in lieu of purchase even with interest rates at historic lows.
Concerning Denver I am not overly concerned as we continue to be in a healthy growth cycle, demand continues to outpace supply and in reality while not inexpensive, when compared to the coasts coupled with the lifestyle, Denver is still quite affordable with the average single-family home in the metro-area running about $300,000.
While I am not reading the tea-leaves the next decade may bring changes to the housing market. As real estate brokers, developers and investors we need to keep an eye on the millennials and their tastes and desires. As the Baby Boomers consider selling and downsizing they will have excess equity to spend i.e. vacation home, travel, investments yet will the Millennials be in line to purchase their homes and prevailing prices? And if interest rates continue to rise, the inverse may happen to housing prices, what then?
Just some commentary for conversation by the water cooler.