Jonathan Smoke, chief economist for realtor.com®, revealed an in-depth analysis of these survey findings during Wednesday’s Mortgage Availability for Millennials and Other First-Time Buyers panel discussion at the National Association of Real Estate Editors conference in Miami.
“Despite the slow indicators we saw earlier this year, 2015 is on pace to be one of the best years for housing since 2006 due to strong sales and higher than predicted home prices,” says Smoke. “Additionally, we’re observing an uptick in millennial traffic and sentiment that we expect will result in more first-time home buyer sales in the later part of the year.”
Smoke went on to explain that first-timers are especially critical when it comes to the health of the market. “Historically, they’re the largest demographic of home buyers and can have a dramatic impact on housing,” he says.
Since the beginning of the year, realtor.com® has observed a slight increase in older millennials – between the ages of 25 and 34 years old – visiting its website and mobile applications with the goal of buying a home. In the first half of June, realtor.com® saw its share of traffic represented by older millennials looking for a home to purchase increase to 23 percent, as compared to 21 percent in January. In mid-June, it also observed its share of those looking for property to rent decrease to 20 percent, from 26 percent in January.
Another revealing metric is the number of millennials who intend to buy a home within the next three months. In mid-June, 65 percent of 25-34 year olds responding to the survey indicated that they intend to buy a home within three months, up from 54 percent in January. Additionally, older millennials and first-time buyers are very optimistic about buying. Both groups are slightly more likely than the average buyer to say that they are “very likely to purchase within the next 12 months.”
“Last year, first-time buyer market share decreased as the year progressed and dropped all the way to 27 percent in the summer, according to data from the National Association of REALTORS®,” stated Smoke. “This year, we’re seeing an increase in millennial demand that points to a strengthening first-time buyer demographic. As the economy continues to grow over the next few years, we can expect first-timers to return to a healthy level of 40 percent of the market. A return to that level would add approximately 15 percent to the number of total homes sold.”
In the first part of the year, millennials were held back by some significant market challenges and were especially impacted by the lack of affordable inventory. Forty-one percent of older millennial home buyers cited that they “have not yet found a house that meets their needs” as the biggest factor holding them back from a purchase. Other reasons included difficulty finding a good house within budget, not spending enough time looking, needing to improve credit score, lacking a down payment, and currently being in a lease.