"Since 2012, potential homeownership demand, based on the lifestyle, societal and economic factors tracked in our HPRI model, has exceeded the actual homeownership rate. Millennial household formation is a major demographic trend driving the increase in potential demand, but rising house-buying power, driven by wage growth and persistently low mortgage rates have also helped boost potential demand," said Mark Fleming, chief economist at First American, according to the report. "Between 2011 and 2018, the annual average of the 30-year, fixed-rate mortgage has been near or below 4.5 percent, significantly below the pre-2011 average of 8.9 percent. In 2019, mortgage rates unexpectedly fell after trending up through much of 2018, helping increase house-buying power and further elevating potential homeownership demand, which exceeded the actual homeownership rate by 3.6 percentage points."
Even despite an economic downturn, demand for millennials is expected to continue to grow. Yesterday we reported that millennial purchase activity has been on the rise with mortgage rates hitting all-time low after all-time low. First American's report revealed that millennials have historically chosen to further their education over purchasing a home, getting married and having children. However, it also reported that a 2019 survey showed that 88% of millennials believe that homeownership is important for personal success. For that reason, millennials are expected to be a driving force in homeownership demand.
“For example, in 2019, potential homeownership demand improved, mostly thanks to millennials
, those between the ages of 22 and 38 (in 2019). Potential homeownership demand in 2019 increased by three percentage points for millennials, outpacing the gains of Generation X (1.7 percentage points) and Baby Boomers (0.8 percentage points),” said Fleming. “It’s clear that as millennials form households and begin to make lifestyle decisions, such as getting married and starting families, they are increasingly choosing homeownership over renting.”
to read more from the First American HPI report.