All Signs Point to a Housing Boom Ahead
Just as many millennials enter their home-buying years, the labor market is strong and interest rates are low.
More potential buyers will be interested in a mortgage and eligible.
Photographer: Drew Angerer/Getty Images
Investors have been so focused on how the Fed’s dovish stance on interest rates led to a rebound in stock prices that they haven’t yet digested how much this development could stimulate the housing market, particularly in the back half of the year. Friday’s strong numbers on existing home sales – up nearly 12 percent last month compared to January – might get their attention.
With the decline in interest rates over the past three months, the housing market now has three tailwinds all lined up for the first time in this cycle. The first is demographics. After declining for 12 years from 2004 through 2016, the homeownership rate has been increasing ever since, as the hangover from the housing bust wears off and the job market has improved to the point where workers are buying houses again. This is particularly true for younger households, who largely couldn’t or wouldn’t buy houses in the years after the housing bust. The biggest birth cohorts of the millennial generation were born between the late 1980s and early 1990s, and they’re now entering their 30s, prime home-buying years. Entry-level housing demand should be robust for years as these buyers start to shift from renting to owning.