The millennial generation (who are, it should be noted, in their late 30’s and early 40’s by now) have gotten the short end of the economic stick for pretty much their entire lives.
They have taken the brunt of two once-in-a-lifetime economic recessions. They were the first real guinea pigs in the great student debt experiment (It has gone poorly). And with baby boomers retiring later, not to mention credential inflation closing off access to the best jobs, decent work has become ever-harder to find. As a result, this generation has reached major life milestones roughly 10 years behind when their parents could afford to do so, with many only now beginning to explore homeownership.
Which, of course, means that prices across the housing market have doubled in the last 10 years.
But Jim Cramer and the Action Alerts Plus team had a bit of good news for these beleaguered children of the Baby Boomers recently after the latest housing starts data. “The U.S. Census Bureau reported that housing starts advanced 3.9%, month over month, in August, to a seasonally adjusted annual rate of 1.615 million. That figure was up from July's revised rate of 1.554 million and outpaced expectations for a 1.55-million-unit rate of starts. With August's reading, housing starts are up 17.4% from the same time last year,” Cramer and the team wrote after the report.
A bit of good news, but just a very little bit:
“Digging deeper, monthly single-family housing starts fell 2.8% (+5.2% year over year) to a seasonally adjusted annual rate of 1.076 million, down from July's revised rate of 1.107 million, while housing starts for complexes with five or more units advanced 21.6% (+60.1% YoY) to a seasonally adjusted annual rate of 530,000, up from July's revised rate of 436,000.
This suggests that the rental market may get a little bit easier in the years to come, as new multifamily buildings put additional apartments on the market. However with new single family construction actually somewhat down from July’s numbers, there’s very good reason to worry that the price of a starter home won’t fall any time soon. This concern is emphasized by the long-term indicator of building permits (which show planned housing starts).
This shows that “monthly permits for single-unit homes increased 0.6% (-0.1% YoY), while permits for complexes with two to four units decreased 22.2% (-20.8% YoY) and permits issued for complexes with five or more units increased 19.7% (+52.7% YoY).”
Housing prices have gone up chiefly because the population kept growing but developers stopped building new houses for those new people to live in. The long term indicators suggest that there will be plenty of new rental units coming on the market, which is good news for renters and urban dwellers. But developers don’t plan to break ground on many single family homes, which suggests that purchase prices may remain high for the foreseeable future.
As usual, this is great news for the baby boomers who own those expensive houses. It’s at best a mixed bag for millennials who might like a shot at having a front yard of their own someday.