Here are three reasons why Millennials are the key to economic growth – Last year was a solid year for real estate in Northeastern Pennsylvania (NEPA) in addition to numerous areas throughout our country, but there are multiple factors to look at in projecting future achievement. And although, predicting real estate success is more accurate than weather forecasting (even with the use of Doppler radar and weather satellites), there are also several variables found in the winds of change in the real estate landscape.
Among homebuyers, the largest group for housing consumption is the Millennials. This population is well versed in the use of new technologies, martial arts and is beginning to outnumber the baby boomer generation.* Alright, I was joking about their martial arts abilities! How is the largest age generation since the boomers impacting real estate growth? Why could they hold the key for a brighter future in this industry?
Here are three reasons why Millennials are the key to economic growth:
- As national home sales continue to rebound, we’ll begin to see the National Association of REALTORS®’s (NAR) 2011 claim that for each home sold two jobs will be created within that local economy. Millennials (aka Generation Y), who are those under the age of thirty-four, compose 31% of recent home purchases.** This group can directly impact job-creation, and in effect, aid their our cause. Many Millennials have post-secondary education, but no job where they’re able to support themselves living on their own. It’s not uncommon that a significant portion of this generation still resides with one or both of their parents. If this year is anything like last, many real estate markets will stabilize. This stabilization will cause a decrease in unemployment and positively influence economic growth. This generation is absolutely involved in this process, and again, a major player.
- According to Lawrence Yun, NAR’s chief economist, Gen Y is poised to invest further in real estate as they see worthy assets when purchasing property. He stated that they’re aspiring to make long-term investments in home ownership and within this group there was “a potential for strong underlying demand.” ** I believe the influence of the law of supply and demand, as it pertains to real estate, is often underestimated. Here in NEPA, we have a stable inventory, but one whose months’ supply of homes (absorption rate) is at its lowest since the end of 2008. If absorption rates continue in this manner, markets throughout the country create good situations for themselves. REALTOR.com reported that although inventory levels at the end of last year were approximately the same as compared to those at the end of 2012, homes were selling faster. We’re seeing this in NEPA as well. The combination of a high demand consumer (in the Millennial) with a shrinking inventory will produce positive economic growth.
- Realistically, there are several factors that could negatively affect these upward trends: Mortgage rates that are beginning to creep up, declines in home affordability index and high debt loads just to name a few. This generation fines themselves smack dab in the middle of it all and often is unable to cope with these challenges in comparision to the baby boomers or even Generation X (the age group typically identified as being born between the early 1960s and the late 1970s). If Millennials can overcome many of these hurdles, they’ll become huge factors to real estate markets nationwide. I believe these potential obstacles mean the difference between short term success for the economy or long-term stability and growth.
All in all, it does look promising here in Northeastern Pennsylvania. We’ve seen a 5.7% year-over-year increase already in the number of properties that have gone under contract through March 14, 2014. Sold properties are also on par with those from last year (year-over-year).*** Last year was the Greater Scranton Area’s strongest year in real estate growth since 2008. All indications look positive and we believe the Millennial generation will play a significant part in boosting our local economy and we’re hoping our national economy as well.
We hope you enjoyed reading “Three Reasons Why Millennials Are The Key To Economic Growth.” Please share your thoughts with us.
* Over the next fifteen years, Millennials will outnumber baby boomers seventy-eight million to fifty-six million. (Better Homes and Gardens 2014 annual report/survey)
** 2014 National Association of REALTORS® (NAR) Home Buyer & Seller Generational Trends study (http://realtormag.realtor.org/daily-news/2014/03/12/generational-differences-drive-housing-preferences)
*** Greater Scranton Board of REALTORS® (GSBR) FlexMLS statistics from 1-1-13 to 3-14-13 and 1-1-14 to 3-14-14