U.S. homebuilders are not able to keep up with millennials, who are expected to be the largest demographic group of homebuyers in 2020, according to www.cnbc.com. There already is a shortage of homes for sale and for rent across the U.S., but the issue reportedly especially will affect affordability for millennials.
The majority of single- and multifamily home construction is in millennial-dense counties, but it lags behind the rest of the U.S. regarding meeting demand. The National Association of Home Builders’ Home Building Geography Index reports millennial counties—geographic areas where at least a quarter of the population consists of this demographic group—account for 62% of the U.S. population but just 59% of single-family homebuilding.
“On the surface, these numbers look similar, but you would expect the single-family construction share to be higher in millennial intensive areas, which tend to feature greater amounts of household formation and population growth that require additional housing,” says NAHB Chief Economist Robert Dietz.
Homebuilding is nowhere near its historical levels mainly because of higher costs for land, labor and regulatory compliance; it currently takes much longer to build homes because of the construction industry’s severe labor shortage.
“You don’t see only a shortage for millennial product where it should be, you kind of see it for all over, but it’s especially intense for millennial product because that’s where the core demand is right now,” says Mark Boud, chief economist at Metrostudy.
The shortage of homes for sale is most severe on the lower end of the market, where millennial demand is highest, and has caused home prices to climb in that category; meanwhile, prices are moderating in the move-up and luxury markets.
Millennials’ share of new mortgage originations is expected to top 50% in 2020. If the shortage of entry-level, existing homes for sale does not ease and production does not increase, affordability for millennials likely will get worse.
