Will More Young Adults Start Buying Homes Next Year?

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In recent times, not many young renters have made the big move to becoming homeowners. According to the U.S. Census Bureau’s American Community Survey (ACS), despite an increase in the young adult population, the number of home owners between the ages of 25 and 34 has declined steadily between 2007 and 2012, with a yearly average of 300,000.

This reduced to 100,000 in 2013 and remained unchanged in 2014; what changed though is the population. With a continuous increase in the young adult population, there can be a change in the home buying trend.

According to Fannie Mae’s Housing Insights Report, an increase in the number of young adults will directly impact the need for more starter homes and advanced services to benefit the technologically savvy buyers.

The Census Bureau projects a 500,000 average annual increase among the 25-34 year olds in the latter half of this decade and this should positively impact homeownership trends. Since it is difficult to look into a crystal ball and predict housing market trends, Fannie Mae’s report bases its statements on the Census Bureau’s population data.

The findings show that the homeownership trend could either:

  • Decline further
  • Remain constant
  • Recover marginally

In case the rates decline further, the per capita homeownership rate will fall by 2.4 percentage points between 2014 and 2020. This means that the number of young buyers would reduce by an average of 113,000 every year, between 2014 and 2020. The real estate market is rooting for the second and third trends because if the homeownership rate remains constant, we will see an increase of 74,000 young homeowners annually. In the third scenario, with a marginal recovery, the number of young homeowners will increase by an average of 111,000 annually.

Which of these is more likely to happen? There has been considerable improvement in the job market, income, and the interest to buy a home; the special financing options available for first time buyers is an added incentive too. Keeping these in mind, it is possible that the homeownerships rates will remain constant or increase. Either way, we’ll just have to wait and watch how the housing market changes over the next few years.

Read the complete report here.

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