The Cooling Real Estate Market

Short-term interest rates have been increased by the Federal Reserve, and long-term borrowing costs have been rising as well. Freddie Mac said recently that the average rate on a 30-year fixed-rate mortgage rose to 4.94 percent, a nearly seven-year high. Those higher costs are making a dent in the demand. Mortgage applications fell to a four-year low recently, and home sales and price increases have been slowing too. 

Ten years ago, a housing collapse contributed to a deep recession. A decade on, what could a housing slowdown mean for the overall economy?

Fortunately, the Millennial generation is coming of age and will be the largest economic force driving commerce and other financial concerns as we move into the years ahead. 

Millennials, as they become young adults, are now embracing one of the most stable pillars of the American Dream — home ownership. And as a result, the soon-to-be largest generation is impacting the housing market. That’s right, Millennials are projected to overtake Baby Boomers as America’s largest generation — and it’s not that far off either. Projections are that this seismic generational shift will occur as soon as 2019. 

According to the National Association of Realtors’ 2018 Home Buyer and Seller Generational Trends Report, 36 percent of the homes sold in the U.S. over the past year were purchased by Millennials. This means that they constitute the largest segment of new homeowners in the country and a very good reason why current homeowners who are looking to sell in the near future should keep Millennials in mind when you make investments in your home.

Consumer Reports recently identified a few features that appeal to this growing contingent of new homeowners.

• An updated kitchen
• Flexible living space
• Energy efficiency
• Hassle-free additions (wood floors, updated mechanical systems, etc.)
• New paint
• Outdoor recreation areas (such as a patio or a porch)
• Smart technology

And while you might be forgiven for thinking that all of these features will be assets to your home no matter who ends up buying it, some of them are considered deal-breakers when it comes to Millennials.

Here are some other things to consider when it comes to Millennials and home ownership. Almost 70 percent of Millennials think of home ownership as an “essential part of the American dream.” The 2018 National Housing Forecast by Realtor.com predicts that 43 percent of the total mortgages will be taken out by Millennials by the end of 2018. 

So no matter which way you look at it, and no matter your opinions of this generation, they are going to be a very influential factor when it comes to the economy (and specifically real estate) in the very near future. 

 

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