Millennials ‘hold the key’ to a strong housing recovery, Harvard research finds

The nation’s housing recovery should regain its footing, but still faces a number of challenges, according to a new study released last week by The Joint Center for Housing Studies of Harvard University.

The report says tight credit, high unemployment and mounting student loan debt among young Americans are moderating growth and keeping Millennials and first-time homebuyers out of the market.

Chris Herbert, research director at the Joint Center, said, “The housing recovery is following the path of the broader (economic recovery). As long as the economy remains on the path of slow but steady improvement, housing should follow suit.”

Although the housing industry saw notable increases in construction, home prices and sales in 2013, household growth has yet to fully recover.

Given the sheer volume of young adults coming of age, the number of households in their 30s should increase by 2.7 million over the coming decade, which should boost demand for new housing, research shows.

“Ultimately, the large millennial generation will make their presence felt in the owner-occupied market,” says Daniel McCue, research manager of the Joint Center, “just as they already have in the rental market, where demand is strong, rents are rising, construction is robust, and property values increased by double digits for the fourth consecutive year in 2013.”

One key to realizing the Millennials’ potential in the housing market, the survey said, is for the economy to grow to the point where their incomes start to rise. Also, the report noted that by 2025, minorities will comprise 36 percent of all U.S. households and 46 percent of those aged 25–34, accounting for nearly half of the typical first-time homebuyer market.

The report also highlights the ongoing affordability challenge facing the country, as cost burdens remain near record levels and over 35 percent of Americans spend more than 30 percent of their income for housing.

The situation is particularly grim for renters, where 50 percent are cost-burdened and 28 percent are severely cost-burdened — meaning they spend more than half of their income for housing, researchers found.

Full Report: The State Of The Nation’s Housing 2014