Already, Zillow has found, millennials are rebuffing the unflattering stereotypes placed on them years ago. Rather than holing up in their parents' basements, millennials are embracing living habits that largely resemble those of their parents. Nearly half of millennials -- now between the ages of 20 and 37 -- live in suburbs, compared with a quarter of their generation that live in cities, according to Zillow.
Still, home buying will remain a challenge for them in 2018 -- suggesting that urban popularity will not collapse anytime soon. Often burdened by student debt and sluggish wage growth, millennials have delayed homeownership in ways that generations before them have not. And the dearth of entry-level homes has not made homeownership any easier.
The extent to which developers will actually begin building starter homes remains a large question. Profit margins are slimmer for entry-level homes, and building often makes sense for developers only if they are in high demand, observers say. And although millennials may be ready for homeownership, the success of more starter homes will likely hinge on whether first-time buyers can actually afford to buy.
According to Zillow's 2018 predictions, the housing market is expected to continue to grow in 2018, though at a slower rate. Home prices will rise 4.1 percent, Zillow predicted, based on more than 100 housing experts and economists surveyed, a slowdown from the current 6.9 percent price appreciation that homes nationwide saw this year.
The growth is not necessarily indicative of a dangerous bubble, the economists say. Compared with a decade ago, when predatory lending practices dominated the industry, the "fundamentals" are much stronger now, according to observers. What that means: Jobs nationwide are growing, demand remains strong, and interest rates are low. As a result, the growth in the housing market is less artificial than it was a decade ago.
At a conference in California earlier this month, Lawrence Yun, chief economist for the National Association of Realtors, also downplayed fears of a high-risk bubble.
"Prices will not fall in the Bay Area," he said, while speaking in Santa Clara County. "As long as they're creating jobs, there's really no reason why" the bubble -- or what is starting to look like a bubble -- will burst.
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