Rent or Own, Young Adults Still Prefer Single-Family Homes
As the housing recovery plods along, many are looking to young adults as a source of new demand that could invigorate the residential rebound. Interest in the housing behaviors of young adults is intensified by the sheer size of the Millennial generation, which by some estimates is the largest in U.S. history. In particular, much attention has focused on Millennials’ household formation and homeownership rates, which are substantially lower than for previous generations.
Another key dimension of Millennial housing consumption is the types of homes that they occupy. A growing body of research challenges popular perception by showing that Millennials, like their predecessors, have a strong preference for single-family homes. This new edition of Housing Insights from Fannie Mae's Economic & Strategic Research Group extends the existing research by examining the rates at which young households occupy single-family homes across the rental, owner-occupied, and recent homebuyer markets and by comparing the structure-type choices of Millennials today with those of young adults prior to the housing crash.
The analysis reveals that the likelihood of a Millennial household occupying a single-family home today is down somewhat from that of young adults at the peak of the housing boom, but is no different than it was for young households in 2000, prior to the boom. Moreover, when structure-type occupancy rates are disaggregated by housing tenure (renting vs. owner occupancy), Millennial homeowners aged 25-34 today are found to be more likely to reside in a single-family home than their predecessors, and Millennial renters are roughly as likely to occupy a single-family home as the preceding generation. Furthermore, 90 percent of 25-34 year-old Millennials who purchased a home recently chose a single-family residence, surpassing the rate at which young adults bought single-family homes at the peak of the housing boom.
A sharp rebound in multifamily construction, but only modest gains in single-family homebuilding, have characterized the housing market recovery. However, Millennials’ desire for single-family homes is not only substantial, but should strengthen in coming years as more members of the cohort age into their thirties, prime years for first-time homeownership. Given the massive size of the Millennial generation, this life-cycle progression should support continued recovery in housing construction and bodes well for a stronger rebound in the single-family sector in the second half of the decade.
To learn more about these findings, read our latest Housing Insights.
Director, Strategic Planning
Economic & Strategic Research Group
July 1, 2015
The author thanks Orawin Velz and Mark Palim for valuable comments in the creation of this commentary. Of course, all errors and omissions remain the responsibility of the author.
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