What comes to mind for you when you think of millennials? For many people, it evokes images of teenagers or people in their young twenties. That is further from the truth than you might imagine. Today the oldest millennials are 40 years old. There are also about 4.8 million millennials that will turn 30 this year. This 30-40 year old demographic has tremendous buying power, but in recent years has mostly existed in the rental market. They have saved money and are about to enter the real estate market in full force, but right now there are not enough homes on the market to house them all.
One of the factors that has kept inventory of homes in a historic low is the pandemic. As vaccination rates rise, people have been emerging back towards normal life. As confidence builds, many people who were staying in their homes will begin to list them for sale. This should bring inventory up from the historical low of just 0.6 months of supply or 2,733 homes in March (per the Canopy Realtor Association), hopefully closer to a balanced market between buyers and sellers which is typically considered to be a 4-6 month supply of homes.
One of those factors keeping people from listing homes was feeling comfortable with people walking around their home with the risk of contagion. That fear is easing, even as virtual tours have boomed, but not been able to fully tell the story of a home for a prospective buyer. A video can be edited to show off a home’s features without showing potentially awkward parts. The only way for a buyer to be truly comfortable with such a large purchase is to actually tour the home.
Foreclosures, which have been on hold during the crisis, will start again adding more homes on the market. There have been moratoriums on evictions and foreclosures which has further depleted supply of homes on the market. While this has provided safety and security for people during the pandemic, now that we are nearing the end, these properties should start to hit the market providing additional supply of homes.
With mortgage rates remaining low, lending has been cheap for people with the ability to get a loan. This has spurred many people to become landlords for the first time. Many of these properties have become short term and long term rentals. We could see many of these homes come up for sale in the near future as well further strengthening supply.
New construction homes are not currently able to keep up with demand. Most developers are seeing waiting lists for homes. In conjunction with this, prices are up due to lack of supply of building materials. Many of the suppliers have ramped production back up, but have not gotten back to pre-pandemic levels of supply. This lack of supply of materials has slowed production on new homes as items like windows are facing backlogs.
Factors are all coming together for a rise in supply of homes. It will take some time for us to actually see the change because it will probably start gradually. Until then, millennials and other potential home buyers will continue to save money putting them in even better bargaining position when the time comes.