The Millennial Generation—all 89 million of them—will be the catalyst to lead the nation’s housing market into its next boom.
That’s the opinion of Jim Kinney, 2015 president of the 41,000-member Illinois Association of Realtors, and vice president of luxury home sales at Baird & Warner in Chicago.
“I think we are on the cusp of another housing boom, and Millennial buyers are going to lead it,” said Kinney in an exclusive interview with Inside Newspapers.
Housing experts say Millennials—young people age 18 to 33 years—are mostly renters, or folks who live at home with parents while paying off student loans. Typically, they are not first-time home and condominium buyers.
However, Kinney disagrees. “Millennials are buying homes, especially in the $350,000 to $450,000 price bracket in Chicago’s hot Bucktown and Wicker Park neighborhoods—enclaves filled with people less than 30 years of age,” Kinney noted.
“I’ve seen a dozen Millennial buyers at showings and multiple bids occurring on the most attractive properties,” he said. “It reminds me of the hot market in Lincoln Park 20 years ago.”
What’s driving the market? Apartment rents are skyrocketing, and Millennials are beginning to marry and form families, he said.
And, not all Millennials are burdened with student-loan debt. “Many are getting down-payment help from their parents, and others are using inherited money,” Kinney said.
Another spark fueling the start of the boom is rock-bottom mortgage interest rates. Benchmark 30-year fixed home-loan rates averaged 3.70 percent in early April. A year ago, 30-year fixed loans averaged 4.41 percent.
Despite worries that the Federal Reserve Board likely will boost mortgage rates at mid-year, Kinney believes the economy has not recovered enough, and the Fed is not ready for the hike.
“An interest-rate increase of a quarter of 1 percentage point could cause a tailspin in the stock market,” Kinney said. “Home buyers and real estate people have played a wait-and-see game with the Fed for three years.”
In reality, “mortgage rates could double and they still would be low by historical standards,” Kinney noted, recalling the days of 18-percent home-loan rates in the early 1980s.
What’s the biggest problem delaying the housing boom? “Millennials prefer new homes and condos, not decade-old units that need rehab—especially new kitchens and baths,” Kinney said.
Because of the housing recession, less risky rental- apartment towers dominate the downtown skyline. There just are not enough new-construction for-sale condo units being built in the neighborhoods Millennials covet.
“New boutique condos in buildings with six to 20 units are selling like hot cakes,” Kinney said. However, the downtown luxury high-rise condo market is just beginning to come back.
Taking a global view, Kinney, a longtime member of the International Real Estate Federation (FIABCI), is working to attract more international investors to Chicago and Illinois real estate.
“The U.S. is a safe haven for foreign investors,” and Chicago is an attractive World-Class city that should be a magnet for them, said Kinney, who is urging local developers to welcome foreigners and their money.
Don DeBat is co-author of “Escaping Condo Jail,” the ultimate survival guide for condominium living. For more information, visit www.escapingcondojail.com.