Why a Millennial Housing Boom Is Coming

The housing market has been experiencing a surprising boom, despite the pervasive volatile conditions that have been impacting it over the past decade. Research indicates that the millennial generation may be the ones responsible for this sudden surge. One of the chief factors that has been appealing to the millennial generation is the fact that 30-year mortgage rates are presently sitting at all-time lows: 3.36 percent. These figures come from Freddie Mac's data; what has been shown is that these rates are holding steady.

A lack of supply, but high demand, has been a crucial driving factor in the home-building market. The reason for the diminished supply ties into shortages of both land and labor. Include the expenses for labor materials, and it is becoming increasingly difficult for the labor workers to meet the growing demand and expectations for housing construction. This supply and demand problem has persisted for the past ten years, yet has still provided growth.

The Millennial Potential

These problems have given way for roughly five million units of demand in the housing system. With many of the millennials falling into the prime age range of 30 to 35 for buying a residence, the conditions now exist for a significant surge to take place on the home market. John Lavallo, an equity research analyst for Bank of America Merill Lynch, anticipates that the coming increase in the market is going to be a massive one in scope. By 2025, the projection shows that there will be approximately three million more millennials shopping on the housing market than their baby boomer counterparts from 1987, which was the peak period of the baby boomer generation.

Reaping the Great Benefits of Lower Interest Rates

Even with the expanding shadow of a recession around the corner, the interest rate of 3.36 percent provides an optimistic outlook. The ten-year Treasury yield presently rests at 1.55 percent, which is a huge improvement, given it used to sit at 3.23 percent in November of 2018. These factors demonstrate that the market is primed and ready for the millennial generation. Appreciation for home price presently runs near the three-percent mark. This is a massive difference from the six-percent year-over-year that existed on the market for the last eight years. These lower interest rates are likely to result in large savings. As the rates continue to dwindle downward, more savings will become available to prospective home buyers on the market. These declining rates will be great for the economy, and good for people looking to build their home.