Baby Boomers have been a
big target in the housing market but the future will see a shift in who
the future housing market will capture. According to Morgan Stanley,
Millennials and Gen Z will slowly take over.
In 2019, it is reported that Millenials (those born between 1981 and 1996) will become
the largest generation in the nation. If all follows as planned, Gen Z
(those born between 1997 and 2012) will take over in 2034. What does
these mean for the housing market? This “youth boom” which is the
merging of these two generations will heighten the economy and encourage
a drive for demand in
housing.
“We’re going to see strong demand for housing, both multifamily and
single family, over the medium to long term,“ says Richard Hill, who
leads Morgan Stanley’s U.S. REIT Equity and Commercial Real Estate Debt
research teams.
We can already see the effects in the housing market in many U.S.
regions. Areas report bidding wars as the Millennials a forming
households. Home prices across the country continue to rise due to the
lack in inventory. There are a reported 22 million people between the
ages of 20 and 24 across the United States that will be adding 3.6
million new households within the next five years.
“Our findings show that household formation will increase 1.7 times
annually over the next five years, compared with the prior eight years,”
says James Egan, a strategist on the firm’s Securitized Products
Strategy team.
The areas with the change in the trend market are definitely effected
in different ways. The West and Southwest are seeing a rapid change
because the Millenials outnumber the Baby Boomers. This is the exact
opposite for New England and the Rust Belt which have the least
Millenial population.
With a new generation comes a new way of buying,
iBuyers. An
iBuyer
is a company that uses a web-based questionnaire and home-value
algorithms to purchase homes. Basically they use technology to make an
offer on your home instantly.
iBuyers will account for 3% of the U.S. existing home sales by 2030.
“3% might seem small in percentage terms,” says Brian Nowak, Head of
U.S. Internet Research, “But given the large size of the residential
market, which is around six million transactions a year and $1.8
trillion in transaction value, it means
iBuyers would purchase roughly 175,000 homes in 2030.”
The U.S. housing market will see a massive change in both target
market and purchasing tools within the next decade. This is great news
for both single-family homes and multi-family homes.
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