It’s been a weird few years for young people. Millennials have seen the dotcom crash, the global financial crisis and Covid- 19, all at critical life stages. These events have each, in their own way, effected how and where Millennials live and likely will continue to mark them for the rest of their lives. While the dotcom crash is a long way in the rearview, the GFC and Covid have both had an insidious effect on this generation’s ability to and interest in affording a home.
As Millennials were first becoming adults, the housing crisis meant difficult credit situations and very few builders willing to add to the housing inventory. The resulting supply and demand picture was really tough. Many have made jokes about living in mom’s basement and not being able to afford a home because there was very little supply available. Worse, when the pandemic hit, the frenzied home buying sent prices WAY higher, meaning that those Millennials that were responsible about the way they budgeted for housing were still left in an apartment even though rents were also churning higher. Generations usually get to home ownership much earlier, but as the calendar turned to 2023, 50% of Millennials finally own a home. Between 60 and 70% of Gen X and Baby Boomers currently own homes, so there is likely still going to be an increase as a percentage for Millennials. But the rate of change may slow.
In the meantime, single family housing supply remains in deficit, Gen Z is even bigger and asset pricing means that they will likely struggle even more than Millennials to afford a house. Ordinarily this would mean that there would be a big push to build more single family and multifamily properties. For the first part of this decade, it felt like we may be seeing an upswing in both, but the combination of inflation and high interest rates have slammed the breaks on this activity. Certainly, there is still some supply coming to market as housing is a long cycle business. That new supply will hit vacancies and rent growth in certain geographies, but overall tightness will remain longer term if for no other reason than demographics and affordability will make it so.