This is the question I am asked most often when talking about the current boom in the housing market. I usually cite two key demographics that are behind this current head-scratching rise, and the primary one is first-time homeowners: Millennials.
Much of the data on this group comes from YPulse, a marketing and research firm that specializes in Gen Z and Millennial consumers. YPulse recently published a report called “No Place Like Home” that offered some understanding on how the pandemic has affected the attitudes and intentions of this huge, young demographic.
While 3 million Millennials have moved back into their parents’ home, the majority are on their own, paying rent costs that in some markets are larger than the cost of an average mortgage. Home ownership is an overriding goal of these young consumers, in part because they have — as a group — shown a strong preference for creating a serene, quiet, and sheltered sanctuary from the world (an attitude that existed even before the pandemic).
Remote working, quarantine, and self-isolation has only accelerated this desire. A recent article in Forbes, by Charles Taylor, sums up these findings: “As young people look to their spaces as mental health retreats, at-home items and services that comfort, declutter, or foster a feeling of escape from the outside world will resonate.” 85% of these consumers, no matter their current living situation, say they plan to eventually buy a house.
Many of these would-be homeowners are out there right now, taking advantage of incredibly low interest rates (hovering around 3%). Those who are not able to purchase right now constitute a reservoir of home buyers that will continue to fuel the market — and home prices — as they chase their homeownership dream well into the early years of the 2020s. Taylor continues, “If more work remains remote post-Covid, this may become a very realistic dream for many young people.”
Recent statistics on our current market reinforce the idea that prices will continue to rise. We are in the middle of an incredible seller’s market in single-family homes. Pending home sales (for the four week period ending September 20, in 434 US Metro Areas) climbed 29% year over year, while housing inventory has fallen in that comparison by 28%. In that same period, year over year, prices increased by nearly 7%.
In this kind of competitive market, sellers will need expert assistance on pricing and negotiation to maximize the market forces that work in their favor; getting the best sale price in the fewest number of days is not as easy as just putting a sign in the ground — there is significant strategy involved. Conversely, buyers will need an even greater negotiation skill set from their agent to make sure they get the home they want in the face of greater competition and price pressure than they would like.
My practice over the last 23 years (through good markets and terrible ones) has been 50/50 sellers/buyers, which gives me useful expertise in navigating both sides of the transaction and key insights into the attitudes of the people on the other side of any negotiation in which I am involved. Give me a call, text, or email if you are planning a home sale, or a home purchase!
Stay safe and healthy!