Next year will be a big one for the residential real estate industry with home sales increasing to 5.5 million units, up from 5.3 million units this year, according to the National Association of Realtor's Chief Economist Lawrence Yun.
Home sales will be boosted by job creation and an overall strengthening of the economy, but the situation will remain difficult for younger first-time buyers, who're still struggling with hard-to-obtain credit and down payments.
Mr. Yun's comments came at the 2015 Realtors Conference & Expo in San Diego, where he noted it's mainly existing homeowners who're benefiting from the improved economy. However, he said the 88-million strong millennial generation (generally those aged 18-34 years old) is still struggling to acquire their first homes, due to a combination of tight credit conditions, high appreciation and low inventories. Because of this, just 32 percent of homes purchased this year were bought by first-time buyers, compared to 50 percent in 2010.
According to Yun, the improving economy will encourage many millennials to start their own households, but the majority will not become homeowners, but renters.
“As they’re coming out of their parents’ basement, they will be renters,” he told the forum.
Unfortunately for millennials, renting is also becoming a problem due to the large demand that's driving up rental rates across the country. Yun worries that this trend could even fuel inflation due to low energy prices, which would affect short-term interest rates and long-term mortgage rates, making it even more difficult for first-time buyers.
The only bright spot in all of this is that lenders are slowly loosening credit restrictions in order to accommodate younger generations.