By: Pierre G. Villere
Last month, I wrote about the lack of impact that Millennials are having on the housing market, one of the reasons that new home starts have not returned to even their annual historical averages dating back to 1961. But the National Association of Home Builders recently published some research that is very telling about the current state of the new housing market, attributable in part to a surprising drop in mortgage rates. And interestingly, Millennials are measured as being strongly in the mix.
Many people start thinking about a home purchase well in advance of actually engaging in the process of finding a home. In a national poll in the first quarter of 2019, 13% of adults reported planning a home purchase within the next year. Of those prospective buyers, 46% are already actively involved in trying to find a home to buy.
The latter finding is not different from a year earlier, when 17% of poll participants were planning a home purchase and 46% of them were actively engaged in the search process, but the enthusiasm for the home shopping process has grown as interest rates have dropped in recent months, prompting further supply.
House Hunting. So, are actively engaged buyers spending a lot of time house hunting? In the first quarter of 2019, 53% of those searching have been at it for three months or longer, while 46% have looked for less than three months. A year earlier, 50% of active buyers reported looking for a home for less than three months. Future polls will determine if there is a growing trend of more people spending upwards of three months searching for a home.
That research also showed that in the first quarter of 2019, adults planning a home purchase (meaning prospective buyers) were asked about their expectations for housing availability in the near future. Results show that 22% expect the search for a home to become easier in the months ahead, an improvement over the 16% who had that same expectation a year earlier. During this period, the share expecting availability to become harder or remain unchanged dropped from 73% to 67%. More data will be necessary to determine a trend, but this finding indicates buyers’ perceptions about the availability of homes for sale is shifting in a positive direction.
Analyzing the data across generations shows that Millennials are the likeliest cohort to expect house hunting to become easier in the months ahead (23%), followed by Gen Xers (22%), Seniors (20%), and lastly, Boomers (18%). Geographically, buyers in the Midwest (25%) and Northeast (23%) are the most likely to expect an easier home search process in the months to come.
For-Sale Homes. Another way to explore buyers’ perceptions about the inventory of housing available in their markets is to ask how the number of for-sale homes, that they like and can afford, is changing compared to three months earlier.
In the first quarter of 2019, 30% of buyers reported seeing more of such homes on the market, an improvement over the 26% reporting increases a year earlier. Meanwhile, the share of buyers who perceive the inventory of for-sale homes they like and can afford to be lower or unchanged fell from 63% to 60% during this period. While these gains are small, they speak volumes for the direction and sentiment of the home-buyers as a whole.
Across generations, 30% of Millennial and 31% of Gen X buyers report seeing more homes they like and can afford on the market, compared to 27% of Boomers and 21% of Seniors. Regionally, at least 30% of buyers in every region, with the exception of the Northeast (26%), report better housing availability in the first quarter of 2019 than three months earlier.
It is all these small but positive movements in trends and indicators that give us some sense of how the housing market is performing, and it goes back to my mantra about sentiment. Those active, or about to become active, in the housing market today feel better about their prospects than in just the very recent past, and that can’t be anything but good news for housing in the foreseeable future. Housing is the driver behind almost all non-residential construction, and strong construction markets bode well for the aggregates industry.
Pierre G. Villere serves as president and senior managing partner of Allen-Villere Partners, an investment banking firm with a national practice in the construction materials industry that specializes in mergers and acquisitions. He has a career spanning almost five decades, and volunteers his time to educate the industry as a regular columnist in publications and through presentations at numerous industry events. Contact Pierre via email at [email protected]. Follow him on Twitter @allenvillere.