Seller’s Market Constricting Inventory as Potential Millennial Homeowners Remain Cautious

A recent poll from Fannie Mae found that first-time homebuyers have become more pessimistic about buying a home than in previous years. According to Fannie Mae’s monthly Home Purchase Sentiment Index only 29% of homebuyers think it is a good time to buy while 72% agree that it is a good time to sell. For would-be homebuyers, that is the least optimistic outlook since May 2020 when the country was in lockdown still and no one knew how the pandemic would affect the market.

Fannie Mae Senior Vice President and Chief Economist, Doug Duncan, shared some insight on the current outlook: “A survey-record share of consumers – particularly homeowners and higher-income individuals – expect mortgage rates to increase in the next 12 months, likely owing to signals that the Fed will raise rates to slow the pace of inflation”. That is exactly what has happened so far in 2022. The Federal Reserve has shifted its focus from helping the economy recover to getting inflation under control. The central bank raised rates for the first time since 2018 and the average 30-year fixed mortgage rate spiked from 3.11% in December to 4.53% in late March.

Along with rising mortgage rates, home prices have been steadily rising as the demand for homes remains high and inventory is being swept off the market in a matter of days in some of the hottest markets. “High home prices continue to be the most commonly cited reason by consumers for their belief that it’s a good time to sell (and a bad time to buy) a home; notably, the ‘good time to buy’ sentiment among renters dropped to a new survey low. This suggests that homeowners and higher-income groups may recognize the importance of getting ahead of the rising rate environment, while renters are keenly feeling the double constraint on home purchase affordability of rising house prices and rising interest rates, “ said Doug Duncan, Fannie Mae Senior Vice President and Chief Economist.

While current homeowners and higher-income individuals might be able to capitalize on the current market the millennial population, the largest generation entering the homebuying age range, is experiencing more of a challenge. Fannie Mae’s poll reported that 40% of respondents ages 18 to 34 believe that homeownership may be out of reach.

As this age groups moves into their prime homebuying years they are missing out on one of the most traditional ways to build wealth. The way that our parents, and grandparents, built wealth: through owning a home and building equity. At The True Life Companies we embody forward looking strategies that will bring new housing options to a much needed housing market. By providing more housing options we enable the next generation to create their own wealth and prosper where they live and work.