Although jobs in the U.S. have been on the rise, data shows us that the new hurdle for Millennials is going to be moving into starter homes that are just too expensive. Clearly prices are moving up much faster at the lowest end of the market, less quickly in the mid range and declining at the top end in most areas, according to daily ARMLS data compiled by Cromford Report, as home affordability grows out-of-reach for promising Millennials.
ARMLS (Arizona Regional Market Listing Service) data for non-distressed sales across Greater Phoenix:
- The monthly average sales price per sq. ft. for homes priced below $200,000 has increased by about 7.5% over the past year, from $93 to $100
- The monthly average sales price per sq. ft. for homes priced between $200,000 and $500,000 has increased by just under 4% over the past year, from $130 to $135
The gap in the the growth rate between the most expensive and cheapest homes is now the widest since 1983, with the latter rising at a pace that’s 5.2 percentage points higher than that of the top tier.
You’ve got the front end of a big wave of first-time homebuyers but the supply of affordable housing is not there to meet that wave,” said Sam Khater, CoreLogic’s deputy chief economist. “What you’re seeing in the housing market is a reflection of the polarization of income. The builders are looking at it from that perspective: ‘If I have a choice of going up- and down-market, I’ve got to go up-market.'”
The starter-home supply crunch is worsening, adding to the pressure on prices. The bottom third of the market accounted for 24.4 percent of listings in August, according to property website Zillow. That’s down from 25.6 percent a year earlier. In Denver, where the shortage is extreme, the lowest tier accounted for just 16 percent of inventory.
Watch: Are Millennials Financially Screwed?
The supply of starter homes cannot support the wave of new homebuyers, which means that Millennials may be going back to their roots to seek help.
Here are a few important ways parents can help them to purchase their first home and capture the American Dream.