Are Seniors keeping Millennials from entering the housing market?
Millennials are buying fewer homes than in times past. This fact has caused quite a ruckus, with numerous pundits looking for answers. Last week, Freddie Mac joined the fray, blaming it all in large part on seniors.
Is that true?
Freddie Mac has been writing about housing shortages across the US for years. In its most recent INSIGHT article, it dealt with who or what is affected the most by the shortage. Of the 2.5 million house shortfall in 2018 alone, about 1.6 million, or 64% is due to seniors deciding to “age in place”, and stay in the homes they’ve had for years.
Seniors can stay in their homes mainly because of better health, and higher levels of education, which make it possible for them to work longer. That, and construction of new homes failing to meet demand, are causing home prices to increase more rapidly, making it more attractive for millennials to rent, and harder for them to qualify to buy. It’s also causing rents to rise.
The impact of 1.6 million fewer homes on the market due to seniors is that 3.4 million fewer millennials can afford home ownership, according to the Urban Institute.
Despite the cooling off of the housing market in the fourth quarter of 2018, Freddie Mac forecasts that home prices will increase by 4.1% in 2019 and 2.7% in 2020.
Relevant article: http://www.freddiemac.com/research/pdf/201901-Insight-02.pdf