Wisconsin’s stoic winter birds—cardinals, chickadees, and blue jays—brave the cold unlike the indigo bunting and rose-breasted grosbeak that relocate to warmer climes. Each is unique.
Chickadees are “cavity nesters,” excavating homes in knots of trees, hiding wood debris from predators.
Blue jays build nests in outer branches of deciduous or coniferous trees using fresh twigs and rootlets, while the indigo bunting finds home in a nest constructed of dry grasses—preferably a snakeskin woven in—positioned among low bushes or tall weeds.
These creatures make housing choices to meet their unique needs and preferences, a behavior not unlike that of the American consumer.
Many variables shape housing decisions. Those in retirement may “migrate” to sunny winter habitats; first-time buyers likely select more modest homes than repeat buyers. Some rehabilitate old farm houses while others build brand new homes, “excavating” rather like the chickadee.
Economic realities are impactful too, despite consumer preferences: many rent or live with parents.
This week, an investigation of 2015’s housing flight path.
‘Sometimes you just gotta be drop-kicked out of the nest.’—Robert Downey, Jr.
“In the U.S., 14% of Those Aged 24 to 34 are Living With Parents,” says Gallup. Contributing variables: a lesser likelihood to be married, likeliness to be un- or under-employed, and a lack of a college degree.
“The biggest impetus for leaving home seems to be marriage; easily the strongest predictor of one’s living arrangement between the ages of 24 and 34,” suggesting that should the marriage rate rise, kids will move out.
The Federal Reserve Bank of New York asks, “Debt, Jobs, or Housing: What’s Keeping Millennials at Home?” Housing preferences for the younger set have “changed markedly” in the past 15 years, says the report. Fewer enter the housing market, instead they linger with parents.
“Homeownership at age 30 shows a precipitous drop following the recession,” in particular for those with student debt. This is important as data show a decline in existing home purchases to first-time buyers to 30%, down from a typical 40%.
“Evidence… shows that co-residence with parents has been persistently increasing for 25- and 30-year olds since 1999,” a trend in accord with increasing student debt responsibility.
However, “it appears to be not the overall strength of the local economy, but the relative circumstances of youth labor markets and goods markets where middle-aged parents tend to live and where independent youth tend to live, that shapes the trend in co-residence with parents.”
Birds of a feather flock together…
Buying remains a more cost-efficient option in the majority of U.S. housing markets, “while the opposite is true in markets with the biggest increase in the millennial share of the population over the last six years.”
First-time buyers confront high housing costs where the jobs are, says RealtyTrac.
Housing markets with biggest jumps in millennial populations over the last seven years are Washington, D.C., San Francisco, and Denver—all exhibiting increases over 50%.
The uptick in rentals can be attributed to many factors, says Zillow in “Renting Vs. Owning: A Tale of Two Decades.” From 2005-2014 “essentially all of the growth in the number of households was driven by renters.”
1. Increased foreclosures forced potential buyers to rent homes “they may have otherwise purchased.”
2. “Doubled up households” created in the downturn dispersed, and many choose to rent “as a middle step before buying.”
3. The high cost to rent. Interestingly, this increases the likelihood of renting as buyers struggle to save for down payments.
“The continued growth in renter households suggests that balance has yet to return to the… housing market, at least not as of March 2014.” However, change is on the wing: The expectation is “housing markets will further normalize over the coming year.”
“Consumer confidence toward the housing market is lagging,” reports Fannie Mae. Although 52% of consumers think “it would be easy to get a mortgage today,” those indicating household income was up over the last year is at 25%.
“Consumer housing sentiment has… been moving sideways amid some improvement in the general view of the economy,” notes Doug Duncan, senior vice president/chief economist at Fannie Mae. Lag in the housing market is not surprising as “Many prospective buyers want to be certain that their personal finances can withstand potential downside risks.”
“Credit tightness has been an issue for the housing market but demand weakness has been a bigger one,” Duncan tells Bloomberg. An improving economy will boost renter ability to purchase, he says, predicting mortgage lending will be up 6.3% after 2014’s 9.6% dip.
He further expects sales of new and existing homes to increase 5.4% to 5.7 million and lending growth to $714 billion, up from $672 billion last year.
‘What is a bird without a tree to nest in?’–Jay Inslee, Washington governor
Meanwhile, “Homebuyers More Concerned About Affordability Than the Lack of Homes for Sale,” reports Redfin. Their survey shows “32.6% of homebuyers… indicated that “affordability in the area I want to buy” was the biggest obstacle to a home purchase,” and 11% blame low inventory.
Over 58% of buyers think home prices “will rise a little” in this year, but on the bright side: homes for sale under $300,000 “likely to increase [in 2015] as more homeowners have enough equity to sell.”
Rising economic tailwinds should provide a boost to the younger buyer who may finally come home to roost.
LORA BRAY is an information research analyst for CUNA’s economics and statistics department. Follow her on Twitter via @Bray_Lora and visit the CUNA blog, “The Research Roundup: Economic Perspectives.”