Millennials May Bolster Housing Market Despite Rising Mortgage Rates
On June 15, the Federal Reserve raised the benchmark federal funds rate by 75 basis points as inflation soared to a 40-year high. This week the average rate on the 30-year fixed mortgage jumped to 6.28%. In an interview with Newsy's Morning Rush," SitusAMC Managing Director Tim Rood discussed what the rate hike means for the housing market.
“Not many people are forecasting any sort of a bust; this is very different than the last housing boom right before the Great Financial Crisis," Rood said. "This looks a lot more like 1977 to 1982, when baby boomers were starting to buy homes. It’s a very similar environment except now you’re dealing with the millennials and you’ll see prices are going to moderate.”
The millennial generation, born 1981 to 1996, is the largest cohort in American history, 72 million strong. “If you are a young family right now -- this is the biggest cohort ever of (Americans age) 28 to 34— and you’ve been in pandemic and want to get out of an apartment, you’re not going to be dissuaded by these higher interest rates today," Rood said. "You’re going to fight your way into that market.”
Although rising rates will reduce demand, inventory is likely to remain low, given that most homeowners have mortgages in the 3% range. "It's going to be difficult to compel those people to sell," Rood explained. "That will impact inventory, which is half of what it was in June 2020." Watch the Newsy video below for the full interview with Tim Rood.