Millennial Optimism May Give Housing a Bright Future
A recent Zillow Housing Confidence Index (ZHCI) shows that the younger, Millennial generation is more optimistic about homebuying than older generations.
This study shows that Millennials are more confident in the housing market, in general, by adding that this younger demographic also believes home values will increase as time goes on. While the Zillow research reflects the U.S. Housing Confidence Index rose to 64.2 from 63.7 earlier this year, it also found that certain regions are more optimistic than others. Residents in Seattle, San Jose, and San Francisco were more confident in the housing market than those who live in Chicago, Philadelphia, and St. Louis.
The ZHCI was sponsored by Zillow and developed by Pulsenomics LLC. It measured sentiments on a 0 to 100 scale, with readings over 50 showing a positive outlook. It was also broken up into three sub-indices:
- The Housing Market Conditions Index (HMCI) – this measured prevailing market trends along with buying and selling conditions.
- The Housing Expectations Index (HEI) – this measured the expected changes in home affordability, values, and homeownership.
- The Homeownership Aspirations Index (HAI) – this measured household home-buying plans and thoughts towards the social value of homeownership.
The recent survey reflected an increase in HMCI and HAI from 60 (HMCI) and 62.4 (HAI) to 62.1 (HMCI) and 62.7 (HAI). While these two sub-indices rose, the HEI decreased from 66.1 in January to 66.3. The ZHCI also compared housing optimism between homeowners and renters, showing an overall higher confidence in the housing market amongst homeowners.
The ZHCI broke down demographics into multiple variables, one of which being age groups that were currently renting. It found that 82 percent of Millennials aged 18-34 had a positive outlook as far as being able to afford a home in the future and it appreciating in value. For Generation X renters, aged 35-49 -- 64 percent had the same confidence in the housing market as Millennials. Baby Boomer renters, aged 50-64, had the lowest expectations, with only 48 percent having a positive outlook. When reviewing confidence levels in home value appreciation, 33 percent of Millennial renters said they expected home values to increase by more than 6 percent per year, over the next decade. Generation X and Baby Boomer renters fell below that with 21 percent of Gen Xers and 15 percent of Baby Boomers sharing in that optimism.
While this positive outlook for the Millennial generation may be due to age, the study uncovered some inherent beliefs amongst this demographic as well. According to the ZHCI, many Millennials agreed with the statement that owning a home is a necessary step to the “good life.” It also found that many of the Millennials believed that homeownership is still an essential step to obtaining the American Dream and being a respected member of society.
This recent study is fascinating to many in the mortgage industry, since most Millennials are entering the housing market with student loan attached to their credit histories. While this specific ZHCI is produced bi-annually by Zillow, these findings show that although this young, educated generation is facing the highest amount of national student loan debt in history, their optimism for their futures and the future of the mortgage industry has not wavered. To learn more about buying your first home or if you’re preparing to sell, please feel free to contact a member of our Team today.
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