A greater share of U.S. millennials say they’re likely to buy a home this year, adding to evidence that first-time buyers are finally entering the real estate market and fueling a jump in sales.
A Realtor.com survey taken in mid-June showed that about 65 percent of respondents between ages 25 and 34 said they intend to buy a home within the next three months, up from 54 percent in January, according to data released Wednesday at the National Association of Real Estate Editors conference in Miami. The share of millennials visiting Realtor.com with the goal of buying a home increased to 23 percent from 21 percent at the start of the year.
Young buyers, traditionally top drivers of housing demand, are helping to bolster the U.S. housing recovery after years of being hampered by student debt and tight credit. An improving economy, surging rents and the prospect of higher mortgage rates are luring in more homebuyers, especially older millennials starting families.
“We are in the midst of the millennials really seriously getting into the market, and that’s the difference on the existing-home side,” Jonathan Smoke, chief economist at Realtor.com, said during a panel discussion at the conference.
First-time buyers accounted for 32 percent of existing-home sales in May, matching the highest share since 2012, the National Association of Realtors reported this week. Millennials have pulled ahead of the older Generation X as the largest segment of purchasers, according to the trade group.
Life-cycle issues such as marriages and births of children are driving millennials into the homebuying market, as are falling prices for new houses and rising rents, Smoke said.
The share of millennials looking for rentals fell to 20 percent this month from 26 percent in January, according to the survey by Realtor.com, which is operated by News Corp.’s Move Inc. unit. The survey results are based on more than 12,000 respondents from the start of the year to June 15.
The prospect of rising mortgage rates is helping to push younger buyers off the fence, Franklin Codel, head of mortgage production at Wells Fargo & Co., said on the NAREE panel. The average rate for a 30-year fixed mortgage has climbed to 4 percent after falling to as low as 3.59 percent this year, according to Freddie Mac.
In Wells Fargo surveys of potential homebuyers, 93 percent of millennials indicate they want to own a home at some point in their lives -- despite some people’s beliefs that young Americans are less interested in buying properties and more willing to be lifelong renters, Codel said.