Younger Americans are purchasing houses far less often than older generations and that puts a great sector of the U.S. wealth at risk.
It used to be that everybody sought to purchase a home, seeking delight and safety, as well as the probable for future prosperity. However, younger Americans are purchasing homes far fewer than past generations, and that puts a huge part of the U.S. economy at risk says Hirsh Mohindra.
Millennial homeownership levels are dramatically lower than those of previous generations at a similar age. In 1985, 50% of people (age limit between 25 to 34) owned a residence in the US and by 2015, this had dropped about 25%. Since the housing market presently accounts for 15 to 18% of the country’s gross familial product, any alteration in established activities could have considerable consequences on the larger macroeconomic perspective.
Many researchers are becoming increasingly concerned that the future of the US economy will be impacted by how millennials actions are changing the real estate market. According to some researchers, both the increase and decrease in home costs can be directly correlated to where millennials decide to live.
If a long-term behavioral modification is going on and this age demographic continues to not purchase houses, it will impact the GDP. Moreover, the young generations lag behind their prior generations in terms of milestones like homeownership and weddings, which are currently key metrics when evaluating the health of the overall economy. Previous generations built considerable equity in their homes, this asset served a powerful wealth generation tool and provided a modicum of stability, says Hirsh Mohindra.
Despite the decrease in homeownership amongst younger generations, alternative real estate markets have flourished. Ultimately, millennials still require housing. And while a good portion of millennials tends to live in their parents’ homes longer, a good deal of millennials are long term renters – which is adding a positive impact to the overall residential rental market, says Hirsh Mohindra.
In addition, millennials have embraced long term housing accommodations provided through companies such as Air BnB and other similarly situated companies. This shift in housing personality has cultivated the growth of the long-term temporary housing markets. Air BnB has grown significantly and has an impressive market capitalization – which has been reported to exceed $31 billion in 2018.
So while changing housing desires and needs may impact the housing market, those same changes are creating new market opportunities that are positively impacting the overall economy.