Between 2018 and 2028, the number of households is projected to increase by up to 12 million. Generation X and millennials are expected to drive most of that household formation. As they replace dropped households over that time, the two generations could add nearly 25 million new households by 2028, according to the CoreLogic Insights Blog.
The largest cohort of millennial buyers have yet to surface on the market, researchers note. That segment, from ages 28 to 30, numbers nearly 15 million and is approaching the average age to buy a first home, 33 years old, CoreLogic reports.
Even as younger generations wait to enter the housing market in high numbers, the market already faces a home inventory shortage. The number of homes for sale has reached the lowest level on record. That has prompted home prices to increase faster than incomes. Over the past two decades, home prices have increased by 1.6 times the rate of real household incomes, CoreLogic says.
Record low mortgage rates over the past few months have helped to offset high prices. Still, first-time home buyers are facing increasing affordability woes as they try to come up with a down payment. While the monthly mortgage payment and insurance have dropped by 3% compared to a year ago, the down payment needed is up 8% (from about $20,000 to about $22,000 for a median-priced home at $225,000), according to CoreLogic.
“This may be a daunting challenge for some particularly given that the median financial asset holding of families headed by a person under 35 years of age is only about $8,500,” CoreLogic notes on its blog.
Down payment assistance may be able to help first-time buyers.