Their like of working from home has guided them moving about the nation
An international gathering of mortgage professionals recently heard about the housing crisis in America – warts and all. Taking center stage in the mix are Millennials.
Nora Guerra (pictured), affordable lending senior manager at Freddie Mac, laid bare the challenges in the US housing landscape during the gathering for the IMBF – International Mortgage Brokers Federation – hosted by the National Association of Mortgage Brokers (NAMB). Attendees at NAMB National 2023 in Las Vegas represented a broad section of the global mortgage industry, comprising professionals from Australia, Canada, Ireland and the United Kingdom joined by their US counterparts.
Guerra didn’t mince words about the challenges that have befallen the American housing industry, beset with low inventory and soaring home values.
How bad is the housing shortage in the US?
“Inventory remains at historic lows,” she told the gathering. “This is one of the bigger challenges within the US. We are scarce when it comes to inventory,” she said.
For added measure, she cited recent statistics from one prominent trade association that dramatically illustrate the housing issues. “According to the National Association of Realtors, we have less than a week-and-a-half of inventory right now.”
The great Millennial migration
Much of that demand is being driven by Millennials – those born between the early 1980s and the late 1990s that are part of the so-called Generation Y.
“Coastal areas tend to actually have less inventory, and that is because Millennials have flocked to coastal areas historically,” she said while showing those gathered graphs to illustrate her point. “Within those coastal areas what we are seeing is lack of inventory because [homes] are being purchased.”
Yet in other regions of the US, she noted, homes are more abundant: “We can also see some of those Midwest states are actually quite fruitful when it comes to inventory,” she said. “Those are the areas we focus on when we see migration,” she said of states in the Midwest and the coastal regions.
“The demand is so huge, it’s actually historical,” she said. “There are 71.2 million Millennials out there,” she said. “Fifty million have not bought a home.”
Freddie Mac began tracking migration patterns during the spread of COVID-19, yielding a snapshot on Millennial behavior. She reminded those gathered how the pandemic prompted employers to allow their employees to work from home.
“And guess what? Millennials loved it,” Guerra said. “And they loved it so much that they packed their bags.”
Much of that migration was to the aforementioned coastal states, Guerra said, but other parts of the country were destination points for the demographic. She said some Millennials went elsewhere due to the high price of housing in California – a preferred stop for many.
“They were feeding into so many other states, particularly Arizona, Texas, Alabama – what we consider states that are affordable by price point,” she said. “The sales price point within California is $928,000, and that’s quite high. So they migrated inward. They love the Midwest as well.”
But as the pandemic scourge lessened in potency – reducing the need for physical distancing – employers began requiring employees to work in-office at least a handful of times during the week.
“Millennials didn’t like that,” Guerra said. “So guess what? They are finding other jobs where they can be permanent remote employees,” she added, noting that this mass migration prompted by work environment is changing the buying persona. “And they got smart on us because they started doing this without us telling them ‘hey, migrate out to find inventory or affordability.”
Some states have benefited more than others from this Millennial migration, Guerra said. “I have to say Texas is at the pinnacle point of this. Migration to Texas has just been phenomenal. No longer is great weather impacting migration,” she said.
“They care about affordability; they care about inventory. Why? Because the oldest Millennial is turning 42. They are fully immersed in the workforce. They are running households, having children, marrying. They can’t live with mom and dad – it’s not sustainable.”
With rent prices soaring as well, Millennials figure it’s best to go for homeownership: “Rent price now equates a mortgage payment in America,” Guerra said. “It’s actually equivalent, and in some high-cost areas they are higher than a mortgage payment.”
As Millennials go, it would appear, so goes the nation.
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