As the housing industry celebrates New Homes Month in April, recent data from the Census Bureau confirms that millennials are increasingly entering the housing market as first-time buyers.
The homeownership rate of millennials—now at 36 percent—registered the largest gains among all age groups in 2017. As the nation’s largest demographic group, more than 70 million millennials are poised to dominate the home buying market in the months and years ahead.
“Millennials are recognizing the benefits of homeownership and are eager to buy their first homes,” said National Association of Home Builders (NAHB) Chairman Randy Noel, a custom home builder from LaPlace, Lousiana. “And contrary to conventional wisdom, this generation is in the market for single-family homes in the suburbs as they look ahead to raising their families.”
Home builders recognize the changing demographics and the increasing demand for entry-level homes. Yet rising construction costs and limited lot availability create significant challenges to building smaller, single-family detached homes that are both affordable to first-time buyers and cost-effective for builders.
With millennials willing to compromise on space, townhouses are offering a more affordable option for younger buyers ready to purchase their first homes. After experiencing a drop during the Great Recession, the share of new townhome construction has been rising since 2009. According to NAHB analysis of Census data, townhome construction in 2017 was up seven percent from 2016.
Millennials also are looking for homes with three bedrooms and two bathrooms, outdoor space, flexible areas that can be used for a variety of purposes and more luxurious finishes, like quartz countertops.
Ongoing economic growth and rising wages are expected to continue boosting housing demand throughout 2018. NAHB analysis of the Census Bureau’s Housing Vacancy Survey shows that the number of home owner households increased by 1.5 million in 2017, while the number of renter households declined by 76,000.