Driven by millennials, builders will increase new homes aimed at first-time buyers in 2015
Zillow, the online real estate database, says it expects builders to try to boost home sales in the year ahead by trending toward less-expensive houses.
As millennials, defined by Zillow as aged 35 and younger, begin buying en masse, housing demand next year will shift toward “the lower end of the market,” said Stan Humphries, the company’s chief economist. By building cheaper houses, builders will help “narrow the price gap between new and existing homes,” he said.
Such a shift will reverse an industry choice to sell “fewer, more expensive homes instead of more, cheaper homes,” he said.
Millennials will become the largest set of home buyers by the end of next year, Zillow said. About 42 percent of that age group have told pollsters they want to buy a home within the next five years — with only about 31 percent of Generation Xers saying the same. Zillow defines Generation X as aged 35-50.
Zillow also says rents will rise at an annual rate of about 3.5 percent throughout next year, while home values will rise more slowly by the end of the year.
“As renters’ costs keep going up, I expect the allure of fixed mortgage payments and a more stable housing market will entice many more otherwise content renters into the housing market,” Humphries said.
When examining housing markets where first-time buyers have strong growth in income and an inventory of reasonably priced houses on the market, Zillow said the top five markets for first-time buyers next year will be Pittsburgh, Penn., Hartford, Conn., Chicago, Ill., Las Vegas, Nev., and Atlanta, Ga.