Although millennials still say they want to buy, a significant number are wondering if now is the right time, according to recent surveys by ValueInsured and Experian. They’re also questioning the future robustness of the housing market.
According to the Experian survey, “younger consumers and those in the West are more likely” to postpone their home purchase.
Contrast this with the torrid level of activity in Silicon Valley real estate these days and you might be inclined to say, as so many have over the years, that the Valley is an anomaly–a socio-economic bubble isolated from the ups and downs of markets elsewhere. And you’d be right, more often than not.
But it’s my perception that the stupendous price increases of Spring 2015 were a game-changer for many who ordinarily would be home-buyers today, and that the equally stupendous price increases of Spring 2017 were the icing on the cake.
It may also be that as millennials become more a factor (or non-factor) in the real estate market, their angst about housing affordability and the compromises it forces on them become more significant. Buying here has always been a challenge, reserved for only the most committed , but I’ve seen more ambivalence in the past two years than I remember seeing over the previous seventeen.
Like any huge and nuanced group, millennials defy easy categorization, but experience suggests that their reservations about buying a home at today’s prices can have several causes:
- heightened and sometimes non-negotiable expectations (“I expect to be impressed”, the tagline to a TV ad aimed at millennials, seems to sum up this attitude best) that can’t be met on a first-timer’s budget
- the trading of a “home buyer” self-identity, one that has traditionally had considerable cachet, for a “we’re priced out” identity that’s become socially acceptable as more and more bright, ambitious and well-paid Valley residents have been priced out
- a questioning not only of the future durability of Silicon Valley real estate, but also of the Valley itself, almost as if Silicon Valley has become so much a part of the established order that it invites youthful skepticism
- shifting and nuanced attitudes toward homeownership–how strong is that “desire to own a home” reported by survey respondents?–that don’t necessarily show up in surveys, with younger buyers more willing to defer or even forego the pleasure; homeownership is still on their bucket list, but is it as high on the list as it was for boomers and X-ers?
Of course, intertwined in all the above is the small matter of lack of affordability, although data from the California Association of REALTORS shows that this isn’t the first time Silicon Valley’s affordability level has been this low. I doubt that many of today’s potential buyers know or care about the on-fire housing market of the dot-com era or the scorching market of the mid 2000s, yet I heard the same complaints about market conditions then that I do now.
And, of course, open houses are busy and sometimes call-the-Fire-Marshall busy, although you don’t need impeccable buyer credentials or even a high level of commitment to walk through the door of an open house.
And, of course, homes continue to sell quickly and with multiple offers, although I wonder how much our shrinking inventory masks any decline in real (as opposed to survey) demand.
But there’s no doubt that we still have extraordinarily committed and qualified home buyers. Today’s prices prove this.
copyright © John Fyten 2017