By: Victor Normand
Your house is going to be purchased by someone between the ages of 25 and 34 (a Millennial) and you are going to move to a condo in Boston to be near others who are also over the age of 55 (the Boomers). So says the Chief Economist for realtor.com®.
The Greater Boston Association of REALTORS® recently held their annual Economic Expectations event at the Federal Reserve building in Boston. The speakers presented their forecast of the housing market in 2016. The main speaker was Jonathan Smoke who is Chief Economist for realtor.com®. He discussed national trends in general and the greater Boston regional market in particular. Boston is one of the strongest housing markets in the country as measured by sales volume and housing appreciation.
Over the next five years, population in the United States will grow by 4%; the fastest growing segment will be the over 55 crowd who will be downsizing which in this part of the country, means moving to the Big City in larger numbers than any other age group. The Millennials in the Boston area, unlike their counterparts in other parts of the country, are managing their college debt because this is where the better, higher paying jobs are.
The Boston region, which includes many Middlesex County communities in our market, continued to benefit from low mortgage interest rates, a strong job market and rising home prices. Although interest rates are expected to rise, probably less than a full percentage point in the coming year, employment numbers will increase and unemployment is likely to remain below the national average.
Demand for housing continues to exceed supply, helping to keep home prices rising although housing production, particularly in the multi-family sector, has begun to increase eventually helping to moderate rising prices. The city of Boston and the near suburbs have seen the greatest price appreciation in 2015 at 15.3%, followed by Middlesex County with a healthy 7.1%.
Even though high home prices make continuing to rent the better economic choice over buying in this area, younger buyers have the income to buy, and in increasing numbers are responding to still favorable interest rates and are just plain tired of their current housing by their own admission. Further, they recognize the demonstrated effect home ownership has on long term savings.
The most significant trigger for Millennial home shoppers is a change in family size. Sixty-nine percent of millennial respondents to a recent survey reported that the actual or expected change in family size including getting married or having a parent move in has made them active home buyers. Historically speaking, not surprising for this age group.
The fundamentals are finally healthy again. The economy is steadily improving, home prices are on the rise, but not unreasonably so, older homeowners are moving on and younger buyers are acting like first time buyers again. The inventory of homes for sale both existing and in the new construction market is getting better and credit access is slowly improving.
Finally, Jonathan Smoke believes there is no US housing market, only local and regional markets and we happen to live in one of the best in the country. So the expectation for the year ahead is that Millennials will be buying and Boomers will be selling, and life goes on.