Millennials hoping for a housing market crash so they can afford a home will be disappointed to learn Zillow's recent forecast for home prices.
Zillow released housing market forecasts for the next year, and millennials won’t be happy about it. The real estate database company expects home prices to dip 2-3% through year-end, or 3-4% in a pessimistic scenario. Then prices will pick up again and return to Q4 2019 levels by August of next year. Svenja Gudell, Zillow’s chief economist, said:
Housing fundamentals are strong — much more so than they were leading into the Great Recession — and that bodes well for housing in general. Despite the difficulties, we’re seeing several signs that there is still a good amount of demand for housing, and buyers, sellers and agents are growing more comfortable moving transactions forward where possible.
Zillow based its forecast on macroeconomic projections by Goldman Sachs and the International Monetary Fund. So Zillow predicated these home price estimates on a 5%-to-6% decline in GDP this year, with a roughly equivalent increase in economic output next year. They also took a hard look at high-frequency data points in several industries.
Millennials hoping for that housing market crash so they can finally afford a home will be sorely disappointed. Housing prices will decline only slightly, according to Zillow’s forecast. Then they’ll start going back up again. In the meantime, the generation born just before 2000 won’t even be able to take advantage of the brief dip.
In 2015, two-thirds of millennials aged 25 to 34 weren’t homeowners. By contrast, 80% of U.S. baby boomers were homeowners as of 2017.
In August of last year, CNBC reported millennials were behind previous generations in homeownership rates when they were the same age:
The homeownership rate among millennials, ages 25 to 34, is around 8 percentage points lower than it was for Gen Xers and baby boomers when they were in the same age group.
And if Zillow’s forecast holds, it looks like things are going to stay that way unless millennials as a group start working hard and making more money. Maybe they should have spent less time volunteering for Bernie Sanders and worked a second job instead.
Apparently, telling a millennial to work harder is one of the most infuriating things you could say to some of them. But they’re going to have to put away the phones and #CancelRent tweets, and put their nose to the grindstone to afford a house.
Many millennials won’t be able to afford a house even with temporarily depressed home prices. Job losses are piling up. That’s left people worried about how to pay rent. A staggering 31% of Americans didn’t pay rent in April. Meanwhile, banks are tightening lending practices for mortgages.
By the time income and jobless rates have recovered, the home prices might have bounced back. Homes might even be more unaffordable. If there’s broad deflation in the economy as many analysts fear, millennials will face stagnating wages and have lower earnings to save up for a downpayment on a house. And good luck buying that starter home in the suburbs if there’s an exodus from the cities worst hit by the coronavirus.
Many tears are being shed for millennials facing their second macro crisis in a lifetime. I don’t feel bad for them. Every generation has had its crises. The Army drafted your grandpa to watch his friend step on a landmine in Vietnam. Instead of hoping a housing market crash lowers home prices, maybe millennials should quit watching Netflix like it’s literally their full-time job: 46 hours a week. Your parents worked for that house, you should too.