During the recession, many young adults graduating from college
were forced to move back in with their parents. This caused new household
formations to drop dramatically from the long term average of 1.2 million
formations annually to half that number. However, this may be the year this
turns back around.
According to the Urban
Land Institute’s report, Emerging Trends in Real Estate,
household formations will increase dramatically. They project that 3.68 million
additional households will be formed in the next three years. This brings
household formations back to pre-recession numbers of 1.2 million a year.
What will happen in 2016?
One of the key
indicators to an improving housing market is household formation: How
many people are moving out and forming an independent living unit? Many
of the people “moving out on their own” will be those Millennials who can
finally move from their parents’ basements to their first home.
Not every person
moving out will decide on an apartment. A certain percentage of consumers will
decide that homeownership is a better option for themselves and their families.
Jonathan Smoke,
Chief Economist at realtor.com, believes:
“Demand for
for-sale housing will grow and will continue to be dominated by older
millennials, aged 25 to 34. This demographic has the potential to claim a third
of home sales in 2016 and represent 2 million home purchases.”
What about household formations moving
forward?
And Louis Keely,
the President of The Demand Institute, predicts strong
household growth will continue over the next ten years:
“We expect new
household formation to be robust over the next decade as the large millennial
generation ages and forms new households of their own.”
Bottom Line
Here come the
Millennials!! They will finally be entering the housing market in 2016 and will
dominate real estate sales over the next decade.
Bret
Wilson
Keller Williams
Flower Mound, TX
(214) 315-9465
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