Are Millennials to Blame for Low Housing Stock?

Millennials are poised to drive homeownership for years to come, and many reached homebuying age during the pandemic. This generation, aged between 25 and 44, led homebuying last year and have the fastest rising homeownership rates. The younger share of Millennials outnumber the older by 9%, pointing toward consistent home demand. In just three years, homeownership rates for Millennials increased from 40% to 47.9%. A recent survey from Clever Real Estate found 30% of Millennials were prompted by the pandemic to start their home search earlier. The intense demand has added further pressure to the housing stock, says Business Insider.

Millennial demand is intensifying the starter home shortage that existed even before the pandemic due to things like rising construction costs, restrictive zoning rules, and real-estate investors snapping up starter homes in hopes of making a profit. In 2018, starter homes represented just 20.9% of available housing inventory in the US, according to Trulia.

Home builders haven't been producing enough homes since the Great Recession, per Jefferies, which said the housing shortage now stands at 2.5 million homes. The lack of inventory means that contractors need to ramp up newbuilds if they want to satisfy growing millennial demand — as many as 1.7 million to 2 million new homes per year, maybe even more to fully restore the imbalance.

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