US housing starts are forecast to reach 1.6 million units in 2021, with homebuilders benefiting from strengthening consumer finances and rising levels of employment. At the same time, sales of existing homes are expected to reach 6.0 million units, with the fastest gains occurring in the South. Although economic recovery has helped consumers achieve higher incomes to purchase homes, rising home prices and a shortage of available properties is presently a detriment to first-time homebuyers, especially millennials.
All-Time High Housing Prices Impede Sales
According to Reuters, existing home sales fell more than expected in June 2017 due to a shortage of homes for sale and strong demand, which pushed average home prices to record highs that some prospective buyers couldn’t afford. As the economy improved post-recession, construction starts of new homes recovered slowly, not returning to levels seen before the recession. This only served to exacerbate the shortage.
Millennial Preferences Complicating the Market
Millennial consumers interested in purchasing a home have different preferences than other generations. For instance, they want everything to be just right and seek out homes that are modern and ready to move in upon closing. Many millennials want to buy a brand new house to avoid maintenance issues and additional costs of repairs or renovations. However, millennials also tend to view their first home as temporary and plan to sell once they can afford their dream home. Many “starter homes” for millennials may be smaller and have less expensive features than a dream home, while still being newly built.
Because millennials make up the largest market of homebuyers – and the poorest – the housing stock has had problems adjusting to their preferences. As such, housing starts are adapting to the changing market while also addressing issues of cost-effectiveness. For instance, manufactured homes, which are expected to grow as a share of housing construction, can be produced rapidly and have high energy efficiency and modern looks, making them of special interest to millennials on a tight budget.
Want to Learn More?
For in-depth analysis of housing trends, see Housing: United States, a report published by the Freedonia Focus Reports division of The Freedonia Group.
To illustrate historical trends, housing starts, the housing stock, existing home sales, average floor space, residential building construction expenditures, the median price of new single-unit conventional homes, interest rates, and the various segments are provided in annual series from 2006 to 2016. This report forecasts US housing starts and the housing stock in units, and average floor space per new and existing units in square feet to 2021. Each measure is segmented by housing type in terms of:
- single-unit conventional
- multiple-unit conventional
In addition, housing starts and the housing stock, as well as existing home sales, are segmented by region as follows:
Furthermore, spending on residential building construction in US dollars is forecast to 2021 and is segmented by type as follows:
While you’re there, you can check out related reports such as Nonresidential Building Construction: United States and Siding Distribution: United States.
About the Author
Cara Brosius is a Research Analyst with Freedonia Focus Reports. She holds a degree in economics, and her experience as an analyst covers multiple industries.