If you think it’s hard enough to find a good deal in the Southern California home market already, imagine adding a young herd of 2.76 million potential house hunters to the equation.
Zillow data researchers say another home search imbalance is brewing, one created by a growing wave of millennials. This group faces a difficult supply of housing, especially âstarter homesâ – defined by Zillow as the bottom third of a market, in terms of price. These residences are becoming more and more expensive and there are fewer available for purchase.
Millennials are just entering the home buying age, and ending up living with parents or other roommates won’t be enough.
In Los Angeles and Orange counties, Zillow found that 2.08 million people will reach the age of 33 – the median age of a first-time buyer in the West – over the next 10 years. This is a herd 12.2% larger than what has happened in the past 10 years. In Riverside and San Bernardino, there are 680,000 potential house hunters coming up, 11.4% more than the previous cycle.
“Their impact on the market has not been fully felt,” says Skylar Olsen, director of economic research at Zillow.
Let’s put this wave of children into adulthood into perspective: This equates to 276,000 more people needing a home each year, whether they buy or rent, assuming they leave home. This is happening in a four-county region that has created an average of 42,000 new homes per year over the past five years. Even assuming three people per unit, the regional norm, you can see how the local housing shortage is only getting worse.
Another study by Zillow found Southern California to top the rankings of millennial countries – defined as people aged 23 to 37 – living with mum – with single mom, or mum and dad – among 50 adults. regions of the United States.
Riverside and San Bernardino counties led the Zillow metro area rankings with 35.4% of millennials living at home in 2017, up from 18% in 2005. Los Angeles and Orange counties ranked in the third in 2017 with 32% of its millennials with mom. This is up from 18.6% in 2005. Nationally, more millennials were living with their mothers in 2017 as well: 22% compared to 13% in 2005, according to Zillow.
Any millennial looking for accommodation will find, according to Zillow’s calculations, a relatively unfriendly local market for first-time buyers.
The mid-priced starter house for LA-OC costs $ 451,000 – the third most expensive of the 38 subways studied. Inland Empire departure houses cost $ 248,500 – # 12 of the subways studied. The national median is $ 130,600.
And the prices go up. This LA-OC starter house benchmark is 44% higher than five years ago, or $ 138,600 more. In the Inland Empire, starting houses have jumped 63% or $ 95,800. SoCal isn’t the only one to be appreciated: the nationwide increase was 57%.
First-time home hunters are facing a decline in the supply of LA-OC starter homes, which are down 9.5% in five years. Supply from the Inner Empire fell 10.8%. Those thinking about other places to live, please note that the national inventory of millennial-friendly residences is down 23.2%.
Not only do these numbers show the portfolio problems young people face, but they also suggest that the recently cooled housing markets have significant underlying long-term support – this millennial push.
“There will be a lot of demand,” says Olsen, “when we really start to see this generation considering buying.”
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If the region fails to meet its youth housing needs, the next generation of workers is at risk. Moving is an alternative.
The only good news for the region in the report is that this youth housing shortage is also becoming a real estate headache in many parts of the country.