Changing mores among the millennials will delay first-time home purchases and contribute to further declines in the national homeownership rate through 2018, according to Zillow.
Most participants in a survey of 104 economists and other experts expect that the recent declines in the nation’s homeownership rate will deepen in the coming years, the real estate listing and mortgage lead generation website said. The reasons, respondents said, include a combination of changing attitudes among those born between the early 1980s and 2000s, known as the millennials, and rising mortgage interest rates and home values, which affect mobility and home affordability.
In 2013, the typical first-time homebuyer was 31 years old, according to the National Association of Realtors; comparatively, 61% of the survey participants said the median first-time homebuyer age would likely rise to 32 or 33, while 24% said they expect it to rise to 34 or older.
“Because of its huge size and great diversity of housing preferences and opinions, the millennial generation will have enormous influence in coming years, especially as they hold off on getting married and having children, the two biggest reasons for first-time home purchases,” said Stan Humphries, Zillow’s chief economist, in a press release Friday.
“A lower homeownership rate because of these demographic shifts will have a ripple effect, keeping rents high and potentially impacting the broader economy.” But, he cautioned, “It is dangerous to assume millennials don’t want to buy at all.”
Up to 57% of these experts expect the homeownership rate in five years would be lower than the seasonally adjusted 64.8% logged in the first quarter of this year. After the survey was completed, the U.S. Census Bureau reported that the seasonally adjusted U.S. homeownership rate fell to 64.7% in the second quarter, the lowest rate since the second quarter of 1995.
In addition, survey participants expect the U.S. median home value will continue to rise through 2017, when it will likely exceed 2007 peak levels, “roughly a decade after the housing bust and ensuing recession began.”
Panelists predicted the U.S. Zillow Home Value Index, which estimates the median home value of all single-family residences, condominiums and cooperatives in a geographic area, would rise 4.6% this year, to roughly $178,000, before the pace slows in the next four years. More than half of the respondents said rising mortgage rates would have a “somewhat more negative impact” on home sales; another 11% said rising rates would have a “significant negative impact.”
Up to 62% of the panelists also expect rising mortgage rates will drive down home sales volume over the next two years. On average, panelists said they expect interest rates on a 30-year, fixed-rate mortgages to climb to 5.28% by July 2016.
“It’s way too soon to conclude that the market has healed and returned to the old normal,” said Terry Loebs, founder of Pulsenomics, a research, data, analytics and consulting firm that conducted the quarterly survey for Zillow.