Millennials Still Want to Own Homes
Meet the SoCal CRE leadership at RealShare LOS ANGELES on March 19.
IRVINE, CA—As GlobeSt.com reported last week, spring housing numbers from Case-Shiller and the FHFA index grew, and the latest trends including increased home sales, moderated pricing levels, decreased mortgage rates and improved inventory, according to Rick Sharga, EVP of Auction.com. GlobeSt.com caught up with Sharga to delve deeper into the meaning of the latest housing numbers and what he anticipates in the sector for the foreseeable future.
GlobeSt.com: What can we make of the most recent housing-index reports?
Sharga: Nationally, I stillthink we’re going to wind up a little light of last year’s numbers, at least in terms of existing home sales. I just don’t see that much demand, particularly from first-time homebuyers, and as home prices continue to go up that starts to create some affordability issues for those who might otherwise be interested in entering the market. I still expect to see home sales surpass last year’s numbers, but we’re weaker than where we should be.
GlobeSt.com: Which sectors of the housing market are recovering and growing the fastest?
Sharga: Senior housing, as in 55+, seems to have some momentum behind it. I wouldn’t be surprised to see that doing pretty well. Entry level is probably the weakest and is struggling in terms of supply and demand. There’s virtually no inventory out there—none at all in the new home market—and buyers who would make up most of that buying group (the 25-to 35-year-old cohort) are sitting on the sidelines. They typically make up from the high 30% to mid-40% in home sales activity, but they now make up 17% in existing homes and 20% in new homes. They’re choosing to rent rather than buy.
What will grow the fastest is hard to say—probably the upper-middle tier. I don’t think the high-end luxury market is growing significantly, but the numbers are skewed because we’re looking at such a low base to start with. Orange County is an exaggerated version of what we just talked about: home sales are up, inventory levels are up from the beginning of the year, but we still only have a 2.5-month supply, which is nothing. In a relatively normal market, we’re looking at six to nine months of supply. So it’s still very much a seller’s market.
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