A New Wave of Home Buyers Is Coming ⁠— Can New Construction Keep Up?

Over the next nine years, 44.9 million people will reach the age of 34, the national median age of current first-time home buyers. That’s an increase of 7.4% — or an extra 3.11 million people — from the past 10 years. While there’s no guarantee these younger people will buy homes as their predecessors did, their sheer number can’t help but impact the housing market. 

Home shoppers will wait out the housing shortage

The lack of homes might push out the median age of first-time buyers as they wait for more homes to become available. Permitting for new single-family homes still lags behind the more typical pace we saw in the 1990s, when incomes and home values were neck and neck. Baby boomers (ages 54-73) are aging in place and aren’t downsizing, which contributes to the current lack of inventory.

Home prices will increase

Long-term demand for homes will likely cause the cooling housing market to correct itself sooner rather than later. In some expensive markets, the decline in home values is like an affordability reset button for impending home buyers.

Will it be millennials? Although this generation (ages 24-38) has yet to fully dive into the home-buying market, they’re the biggest share of home buyers in the U.S. — 32% of new construction home buyers and 61% of all first-time home buyers are millennials.

Affordability will prompt buyers to move

Some markets are currently affordable because the pool of buyers is smaller. Those markets might change as they’re flooded by a bigger wave of buyers fleeing more expensive markets. 

For example, according to our research there are about 20% more people reaching the age of 34 than there were in the past 10 years in Boston and San Diego. But in Charlotte and Washington, D.C., there are about 1.5% fewer potential home buyers (34-year-olds) than in the previous decade.

The fluctuations of the U.S. population and housing inventory are intertwined. There’s no way to predict if members of the incoming wave of buyers will purchase homes at the same pace as those who came before, but the challenge to meet upcoming housing demands is a sure thing.

Want more insights about today’s new construction buyer? Download the Zillow Group New Construction Consumer Housing Report 2018.