Millennials continue to aspire toward homeownership, according to the newest edition of CoreLogic’s Home Price Insights (HPI) report. But with prices continuing to rise, many have had to make some difficult choices to achieve their homeownership dreams.
“On a national level, home prices are on an upswing,” said Frank Martell, president and CEO of CoreLogic. “Price growth is likely to accelerate in 2020. And while demand for homeownership has continued to increase for millennials, particularly those in their 30s, 74% admit they have had to make significant financial sacrifices to afford a home. This could become an even bigger factor as home prices reach new heights during 2020.”
Martell cited figures from a CoreLogic survey on consumer-housing sentiments conducted in the second quarter of last year. That survey found substantial contrast in homeownership aspirations between younger millennials in their 20s and older millennials in their 30s. Although 79% of younger millennial renters, for example, indicated a desire to buy a home in the future, many of them do not currently feel the need to own a home.
Those priorities change as millennials age, the survey indicated, with homeownership rates for Generation Y nearly doubling once these consumers reach their 30s. And with the peak of millennial births occurring in 1990, the market could be heating up at an inopportune time for many young, would-be homebuyers. Although affordability is currently at a two-year high, CoreLogic chief economist Frank Nothaft is among those concerned about rising prices at the entry level.
“Moderately priced homes are in high demand and short supply, pushing up values and eroding affordability for first-time buyers,” Nothaft said. “Homes that sold for 25% or more below the local median price experienced a 5.9% price gain in 2019, compared with a 3.7% gain for homes that sold for 25% or more above the [local] median.”
Rising demand also is helping hasten price acceleration in all tiers of the marketplace. According to the HPI report, home prices nationwide (including distressed sales) grew 4% year over year this past December —the third straight month that the HPI’s reported annual price growth has risen. Home prices also grew month over month by 0.3% in December 2019, down from 0.5% growth a month earlier as activity slowed through the winter.
Looking forward, CoreLogic’s HPI Forecast expects annual price growth to climb to 5.2% from December 2019 to December 2020. Month over month, the forecast anticipates an increase of 0.1% from December 2019 to January 2020.