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Strong demand in the real estate market has been one of the major economic stories of the last year. The COVID-19 pandemic put a premium on living space, while strong savings rates and investment returns, aggressive government stimulus, and persistently low interest rates have put the conditions in place for more homebuyers to enter the real estate market. But this surge in demand has made the market highly competitive and driven home prices to record highs.
While demand in the current market is in many ways shaped by factors related to the pandemic, one of the other driving forces is demographics. The Millennial generation—those born between 1981 and 1996—recently surpassed Baby Boomers as the largest living generation in the U.S., with more than 72 million members. And at ages 25 to 40, the Millennials are also in the prime age range for first- and second-time home buying. According to a recent report from the National Association of Realtors, Millennials now represent 37% of homebuyers, the largest generational segment of the market.
But these prospective young homebuyers have been frustrated by record-low housing inventory up for sale. Many would-be sellers have held off on listing their current homes, valuing their own living space during COVID-19 and apprehensive about looking for their next home in an ultra-competitive market.
According to data from Redfin, the supply of homes for sale has been lower since the pandemic began than at any other point in recent years, reaching several new historic lows. The common measure for supply is months of inventory, which is calculated as inventory divided by home sales and estimates how long it would take current supply to be bought up if no new homes came on the market. That figure dipped below 2 months for the first time in July 2020 and has remained there since, reaching an all-time low of 1.1 months in June 2021.