Millennials were more negatively affected by the financial crisis than other generations as they were in the early part of their careers and didn’t have the savings to withstand the crisis. The combination of stagnant wages, lack of jobs/savings, and rising home prices meant that millennials were unable to afford to buy homes after the downturn (we do believe some millennials soured on homeownership and chose not to buy even when they could afford to do so). In fact, homeownership rates had fallen across all age groups during this time. Millennials, however, experienced the biggest drop in homeownership rates (decreased almost 21% since peak ownership levels in 2004). Additionally, while previous generations saw home ownership rates start rising again in 2015 (after declining after the financial crisis), this was not the case for millennials.

It seems now that millennial behavior is changing amidst this hot housing market where homeownership rates are now rising – and a key reason is that the generation is reaching an age where they are starting to form families, a traditional driver for purchasing a home. Last week the Census Bureau reported that ownership increased to 63.9%, which is a solid 0.4% increase from last year. Despite this growth, the 63.9% rate is still far below the 69% ownership rate from the housing bubble peak.

As homeownership rates rise, we are seeing a corresponding weakening in the rental market. A few rental companies in the affordable, nonurban markets have reported disappointing revenue growth, which is usually a precursor to weakness on the luxury rental market in big cities. Many landlords are also offering concessions of one to two months free rent.

The strengthening homeownership market could still be halted by factors such as rising interest rates and tax code changes. Additionally, job growth is slowing in some markets. Still demographic trends, such as millennials marriage rate will be important to watch as millennials may start to favor ownership over rentals.

 

Castle Placement is an investment bank (founded in 2009) that raises raise equity and debt capital for companies in a variety of industries from our institutional investor network (>27,000 investors – PE/VC firms, hedge funds, family offices, asset managers, lenders, etc.).

www.castleplacement.com

 

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Thanks, Ken

Ken Margolis | Managing Partner Castle Placement, LLC
1460 Broadway Street, Rte 400
New York, New York 10036
(212) 418-1188 | C: (516) 712-7784
kmargolis@castleplacement.com

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