The housing market has been hot for a couple of years now, and that’s unlikely to change any time soon as millennial demand remains red hot, according to new data from Bank of America (BAC).
The 2022 Millennial Home Improvement Survey found that 67% of Generation Y responded that they were likely to buy in the next two years.
“The #1 reason cited was an improving financial position, following the trend from the last few years of our survey,” BofA Global Research’s Senior Retail Hardlines Analyst Liz Suzuki wrote in the report. “This is consistent with strong household balance sheets and rising wages in the U.S. Compared to prior years' surveys, a larger percentage of respondents also stated that they are receiving financial support from others.”
Members of the “Generation Y” cohort — composed of people born anywhere between the years 1980 and 1996 — currently are the largest segment of the home buying population. Millennials make up about 43% of new home purchases in the United States, up from 37% in 2021, according to the National Association of Realtors.
Millennials represent about one-fifth of the U.S. population, and have also been the fastest-growing segment of the home-buying market. According to the survey, a majority of millennials are now homeowners. Fifty-three percent of millennials surveyed responded that they own their home, up from 52% in the 2021 survey.
The study also concluded that higher demand for housing among millennials is leading to greater focus into home improvement and renovation.
“Rising millennial homeownership rates should continue to provide a medium-term tailwind to the home improvement retail industry,” Suzuki explained. “80% of those surveyed stated a preference to buy an older, less expensive home and renovate it rather than buy a new home in order to save money.”
Additionally, over 75% of current millennial homeowners began home improvement projects within the first 12 months of their purchase, suggesting that higher demand among the generation imbues greater focus to renovation activities.
Has the housing market peaked?
As housing prices continue to rise and mortgage rates climb higher in sync with rising interest rates, economists have cautioned that the market may be peaking soon.
"The housing market is looking increasingly vulnerable with a price correction possible,” ING’s chief international economist James Knightley wrote in a recent note. If prices did decline, it would reverse a two-year period of some of the hottest growth in home prices in decades.
The market has been historically hot thanks to an influx of demand from prospective homebuyers emerging from pandemic restrictions to enter the market as well as low supply resulting from supply chain disruptions. However, this summer, economists expect a greater supply of homes to hit the market.
Data released from Realtor.com earlier this month showed that April 2022 had the lowest decline year-over-year of housing supply since the end of 2019. Still, consumers have been suffering from an affordability crisis in housing as a result of inflated prices and extraordinarily low supply.
Ihsaan Fanusie is a writer at Yahoo Finance. Follow him on Twitter @IFanusie.