Millennial is the largest home-buying legion and thus influence the real estate market is so many incomparable ways. They lie at the very core of creating demand for accommodation as many moved back in with their parents. Power Brokers stated in RISMedia's Power Broker report that 38% of their sale came from first-time Millennial Homebuyers.
Well, there are certain factors that can control the moving-out of the young adults. Firstly, according to Freddie Mac's March Insight the headship rate (millennials heading a household) has seen a downfall of 3.6% in 2016 as compared to 2000. The main reason of this downfall is the rising costs of homes and static millennials' wages. All these years from 2000 to 2016, the earnings increased by only 1% whereas the housing prices shot up by 29%. If the conditions would have been like in 2000,then today the US would have required 1.6 million extra houses.
In fact, according to RISMedia, the home prices have risen up by 5.9% in March 2018. The market analysts are definite of one thing; one should not ignore this gap. According to them, the restriction in affordability has caused around 28% downfall of building up new households by young adults. If it continues like this, then it would surely pose some calamitous deductions for the market. Now, even an pay raise won't be of much help because an increase of 1% in the home price reduces the millennials' headship rate by 5%. Len Kiefer, Deputy Chief Economist Freddie Mac, believes that it is the home prices and affordability that is restraining the young people for setting up their household. If the housing costs go on rising like this then there will 600,000 fewer homes in the next decade.
Secondly, family needs and timing together is another big reason. The main driving for household build-up was aging, marriage and children which doesn't happen that quickly these days. Even the marriage and fertility rate is lower now in comparison to 2000.
If these factors improve, the rate of millennial household formation would increase. The alternative as believed by the market analysts, may have some serious consequences on the investing, homeownership, and on the whole wealth.