The notion that somehow an affluent set of Millennials is going to shift the housing market is not happening. What is happening is rather clear; historically low housing inventory is causing prices to inflate in the face of what has been very low new home building. If you want to buy, your options are usually an outdated crap shack that is already at an inflated price or in some new areas, glorified condos where builders are trying to max out every square inch of development where you can smell what your neighbor is cooking. The fact remains the same, over the past decade there has been a dramatic shift of renter household formation (not homeownership). For Millennials, tastes are dramatically different. Sure, you have Taco Tuesday baby boomers glued to Fox, MSBC, or CNN (typical age of viewers is 60+) so many are simply out of touch with the wants of younger Americans. Builders however understand this dynamic and multi-family unit construction has been running briskly for the last few years. Many large cities have now converted into renting majority locations.
Majority Renter Cities Expand
More than 20 large cities are now renting majority cities. This is a big shift and of course goes against the trend that things are back to “normal” in the sense that if you want to own in certain locations you will need to overpay for a crap shack. Low inventory and house humping logic are powerful draws. Many over spend dramatically when they buy. You see this with DINKs – they buy with two incomes but then pop out a kid and suddenly realize that in many overpriced hoods that daycare is expensive if you want to maintain a dual income household. We’re talking $1,200 to $1,800 a month. Forget about feeding an extra mouth or two. Yet they assume today will be like tomorrow. Nothing in their formula accounts for unexpected costs.