millennials households

2.4 Million Millennial-led Households are Missing

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Just 40% of those ages 25 to 34 led their own household in 2016, and that number has been dropping steadily since 2000 (46%). According to NAHB analysis by economist Natalia Siniavskaia, that missing 6% equates to roughly 2.4 million would-be households.

While all age groups recorded continuous declines of headship rates between 2000 and 2016, none saw a faster drop than the 25-to-34 year olds — once the primary driver behind the big housing boom of the post-World War II era.

Affordability is the big issue, with the high costs of living, escalating rental rates and rising home prices — factors that impact people of all ages, but might seem especially daunting to younger generations with typically fewer resources and lower salaries.

As a result, young adult house sharing has risen significantly: The portion of young adults who choose to live with their parents or other relatives rose from 15.3% in 2000 to 26.3% in 2016. Additionally, the percent of those who live with roommates (non-relatives) jumped from 5.1% in 2000 to 7.5% in 2016.

A clear trend emerges when comparing household formations — or lack thereof — across the country: States with the more expensive housing markets have the lowest headship rates among 25-to-34 year olds. California, New Jersey, Florida, New York and Hawaii are consistently among the least affordable places to live and have the lowest headship rates, some of which are well below 37%.

On the other end of the affordability scale, states such as North and South Dakota, Iowa and Nebraska register the highest headship rates, ranging between 48%-49%.
Source: NAHB Eye on Housing report

What Happened to Rates Last Week?

Mortgage backed securities (FNMA 4.50 MBS) gained just +1 basis point (BPS) from last Friday’s close which caused fixed mortgage rates to move sideways for the week.

Overview:  The bond market (specifically Mortgage Backed Securities) was range-bound with very solid resistance and support levels that were tested and that held.  It was a fairly light week for economic data but the data that we did get was solid.

Inflation Nation: The July YOY Consumer Price Index was a smidge hotter than expectations with the Core (ex food and energy) beating expectations with a 2.4%YOY gain vs est of a 2.3% gain. The Headline CPI matched expectations with a YOY gain of 2.9% which also matches last month’s pace. The July YOY Producer Price Index was one tick off of expectations (3.3% vs est of 3.4%) but still at very elevated levels. When you strip out the more volatile food and energy, the YOY Core reading was 2.7% vs est of 2.8% which is well above the Fed’s target inflation rate of 2.0% even though they use PCE instead of PPI to measure inflation.

Jobs, Jobs, Jobs:The job market is still wide open.  The June Job Openings and Labor Turnover Survey (JOLTS) showed that there were 6.662M unfilled jobs which was higher than the market forecasts of 6.646M. For the third straight month, there were actually more jobs available than there are people looking for work.

Economic Optimism: The IBD/TIPP August reading shows that consumers are not scared of the the Trade Snore.  The August reading was higher than expected (58.0 vs est of 57.2) and is one of the highest readings in history.

What to Watch Out For This Week:

The above are the major economic reports that will hit the market this week. They each have the ability to affect the pricing of Mortgage Backed Securities and therefore, interest rates for Government and Conventional mortgages. I will be watching these reports closely for you and let you know if there are any big surprises.

It is virtually impossible for you to keep track of what is going on with the economy and other events that can impact the housing and mortgage markets.  Just leave it to me, I monitor the live trading of Mortgage Backed Securities which are the only thing government and conventional mortgage rates are based upon.