U.S. job offers for Millennials are getting better; therefore, buying a home may get easier. However, for the millennials, it still is not getting any easier as the demand for starter homes is increasing, which pushes the prices even higher.
The prices of least expensive and previously owned homes have increased about 10.7% in August which represents one of four price tiers to surpass the peak reached during the housing bubble. This was according to the housing index released by CoreLogic Inc. The August pace alone was 5.9% above the pre-recession high in October 2006.
Although Zillow predicted that Millennials will overtake Generation X as the largest group of homebuyers, the latest generation is more inclined to buying least expensive homes.
According to Bloomberg, the gap in the growth rate between the most expensive and cheapest homes is now the widest since 1983, with the cheapest ones rising at a pace that's 5.2 percentage points higher than that of the most expensive ones.
"You've got the front end of a big wave of first-time homebuyers but the supply of affordable housing is not there to meet that wave. What you're seeing in the housing market is a reflection of the polarization of income. The builders are looking at it from that perspective: 'if I have a choice of going up- and down-market, I've got to go up-market,'" said Sam Khater, deputy chief economist of CoreLogic.
"In recent years, home builders seem to have made a conscious decision to sell fewer, more expensive homes instead of more, cheaper homes. In 2015, that will change, especially as demand moves toward the lower end of the market as millennials begin buying en masse. New home sales volume has been stuck around the 450,000 per year mark. In order to break out and get that number above 500,000, builders are going to have to start to build cheaper homes, which will help to narrow the price gap between new and existing homes and contribute to more rapid inventory gains," said Dr. Stan Humphries, Zillow chief economist.
For the millennials who are on their first jobs and are looking for cheaper homes to reside in, the scarce supply of these homes poses a big problem. The only way to solve the problem is as stated by Humphries of Zillow, which is for the homebuilders to build a number of cheaper homes to stabilize and narrow down the price gap.
Do you think price for cheaper homes will worsen?
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