A greater share of millennials say they're likely to buy a home this year, adding to evidence that first-time buyers are finally entering the real estate market and fueling a jump in sales.
A Realtor.com survey of site visitors taken in mid-June showed that about 65% of respondents between ages 25 and 34 said they intend to buy a home within the next three months, up from 54% in January, according to data released Wednesday at the National Association of Real Estate Editors conference in Miami. The share of millennials visiting Realtor.com with the goal of buying a home increased to 23% from 21% at the start of the year.
Young buyers, traditionally top drivers of housing demand, are helping to bolster the housing recovery after years of being hampered by student debt and tight credit. An improving economy, surging rents and the prospect of higher mortgage rates are luring in more homebuyers, especially older millennials starting families.
"We are in the midst of the millennials really seriously getting into the market, and that's the difference on the existing-home side," Jonathan Smoke, chief economist at Realtor.com, said during a panel discussion at the conference.
First-time buyers accounted for 32% of existing-home sales in May, matching the highest share since 2012, the National Association of Realtors reported this week. Millennials have pulled ahead of the older Generation X as the largest segment of purchasers, according to the trade group.
Life-cycle issues such as marriages and births of children are driving millennials into the homebuying market, as are falling prices for new houses and rising rents, Smoke said.
The share of millennials looking for rentals fell to 20% this month from 26% in January, according to the survey by Realtor.com, which is operated by News Corp.'s Move Inc. unit. The survey results are based on more than 12,000 respondents from the start of the year to June 15.
The prospect of rising mortgage rates is helping to push younger buyers off the fence, Franklin Codel, head of mortgage production at Wells Fargo & Co., said on the NAREE panel. The average rate for a 30-year fixed mortgage has climbed to 4% after falling to as low as 3.59% this year, according to Freddie Mac.
In Wells Fargo surveys of potential homebuyers, 93% of millennials indicate they want to own a home at some point in their lives — despite some people's beliefs that young Americans are less interested in buying properties and more willing to be lifelong renters, Codel said.
"It's just a question of when and preparedness," Codel said.
One factor limiting millennial purchases is the "tremendous amount" of student debt they’re burdened by, said Dennis Carlson, deputy chief economist at Equifax Inc.
Americans under the age of 30 had a total of $369 billion in student debt last year, up from $146 billion a decade earlier, according to data from Equifax released Wednesday.
"I don't think it's the only issue holding millennials back," Carlson said at the panel, adding that unemployment and underemployment are keeping some young people from making property purchases.
First-time buyers are likely to have the most impact on the existing-home sales market because prices for new houses tend to be higher. They're entering the new-home market from a "virtually nonexistent" level, and remain constrained by tight credit, Stuart Miller, chief executive officer of Lennar Corp., said on the homebuilder's earnings conference call Wednesday.
"The doubling up of the millennials during the downturn will ultimately unwind and give way to household formation," Miller said. "We've already seen evidence that this is beginning to happen."
