When In Doubt, Blame The Millennials

Want to talk about the ever captivating theory of the glass being half-full or half-empty?... Or is it too early in the morning to go deep into philosophy? Let’s give it a try. Don’t worry, we’ll keep things simple and maintain the focus on this year real estate activity since, after all, it is what this blog is all about.

First, the good (very good) news. The market, all over the map, is warm to hot. It has been for a while and shows no evident signs of slowing significantly anytime soon. The second quarter of the year started with a decade-long record, with pending sales in April reaching their highest level since 2006. The Spring buying season is ramping up. The National Association of Realtors reports that the pace of home sales is up more than 10% over last year.

It is now a good bet that the 2015 number of existing home sales (5,250,000) will be substantially surpassed. The Northeast and the Midwest are leading the pack with a better than double-digit increase over last year. Prices, nationally, are also on the rise. Not sure it’s good news for the home buyers but the sellers are not complaining. All regions are “benefiting”, from 4% in the East to better than 7% in the Midwest. The sales’ activity is a bit slower in the South & the West but, for the most part, this has not kept prices from edging up y/y so far.

Time to pop the champagne cork and celebrate another top vintage year? Almost. Let’s be a bit more patient though. Today is June 15, inches away from the mid-year point. In a few weeks, once we have collected all the data on closed sales, pending business and active listing inventory, we’ll try to make smart educated guesses on 2016 as a whole. Should be a dandy, but we all know that 6 months don’t make a year. The difference between semesters is often more pronounced that the difference from one full year to another.

What I propose today, is to recognize with nice words if not flowers the drivers of the real estate activity we enjoyed so far this year. Who can we thank for what is shaping up to be another banner year? Let’s give a hand to the Baby Boomers, the 51 to 69 year-old among us. They are pulling the train. 75% of them are homeowners. That’s pretty good considering that the homeownership rate in the US is declining. From 69.4% in 2004, it now stands at 65.1%. FYI, it is under 55% in California (do you think affordability has anything to do with that?).

At the tail-end of the train, guess who we find: the Millennials, the 18 to 35 age group. Come on guys, we are counting on you! It’s your turn to grease the engine 😀. Alright, let’s be fair. We know that you have legitimate excuses and attenuating circumstances. To name a few: many millennials, fresh from school, are still looking for a job…. or have one that does not pay well while real prices keep on going up (In California, 33% only have a full time job & 19% work part-time)…. or burn their money paying off student loans…. or are still going to college to have access to better job opportunities; or ….

Sign of the times: more than 32% of Americans between 18 & 34 live in their parents’ homes. Interestingly enough, more men live with Mom & Dad: 35% vs. 29% for women. The other related trend and big shift in the Millennials’ behavior is the postponement of marriage. The large majority of them are single and 9% live in partnerships. What a change from the recent past. In 1960, according to a Sallie Mae report, 62% of young adults lived with a romantic partner, compared to 20% who lived with their parents.

This phenomenon has obviously a big impact on the number of real estate sales. Millennials who are married are more likely to have kids and buy a home. Big cities on both coasts are particularly affected by a reduction in home purchases due to high prices and a more active social life. The ring can wait.

So, let’s again thank the Baby Boomers for keeping the American Dream alive & strong. According to the National Association of Realtors, they are set to inherit $13 trillion of wealth in the next 20 years… Nice omen.

A special thanks to single female Baby Boomers who, as reported by NAR, are buying twice as many homes as single men. The report goes on saying that 74% of them are as confident as they were at 35. They plan on buying more, better and bigger homes.

May the Millennials take note and learn from the wise.