LGIH: millennials and housing recovery

A Morgan Stanley report with some very interesting data.

http://www.scl.bz/zz5hz29-media.pdf

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“Although this recovery has been characterized by unusually high demand for rental units, we appear to be at an inflection point where single-family housing starts are likely to overtake multifamily starts. The consumer has finally deleveraged, real wages are increasing, and home affordability remains very high. This supports our positive outlook for a return to homeownership.”

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Huh. I listened to a discussion on my drive home from work today on CNBC about millenials not interested in owning homes or cars. They intimated a rise in rentals, shared rides, as the millenials choose to stay out of debt, and mobile.

Only time will tell.

Very nice presentation with useful graphs (fast and easy to read). Here are some slide titles and snippets…

US housing starts have only recovered 50% of their prior peak.

“US Multifamily Starts Decelerating, Single Family Accelerating…we are near an inflection point.”

“US Household Formations Have Inflected and Should Stay Above
Average…US household formations have never been this low for so long, representing significant pent up demand”

Consumer Has De-levered and Wages Are Improving in Real Terms…

Percentage of Millennials Living With Parents Has Increased;
Those Moving Out Are Finding Roommates…

Millennials Have Recovered Lost Jobs, but Job Creation Must Keep
Up With Population Growth…20-34 age cohort has regained the number of jobs lost in the recession, but the percentage with jobs remains low…

Growing Baby Boomer Career Length Has Suppressed Millennial
Job Creation, But Boomers Are Nearing Retirement Age…

Millennial Households Growth Has Been Depressed, but Is
Beginning to Return…

Overall, Millennials Have Less Debt Than Previous Generations…

Bottom Line: Expect a Long but Steady Recovery
• The US housing market has made significant strides since 2008, albeit slowly. Home prices are
nearing their pre-crisis peaks and household formations are back above their long-term averages.
• We are still in the early stages of this recovery. A unique confluence of factors indicates high pent-up
demand and growth potential. US housing starts have only recovered 53% from their pre-crisis peaks,
while household formations appear to be rebounding after 4 years at historically low levels.
• Although this recovery has been characterized by unusually high demand for rental units, we appear
to be at an inflection point where single-family housing starts are likely to overtake multifamily starts.
The consumer has finally deleveraged, real wages are increasing, and home affordability remains very high. This supports our positive outlook for a return to homeownership.
• Millennials are just beginning to participate in the housing recovery and this cohort is expected to
grow by 8.3 million people in the next 9 years and enter a life stage where consumption expenditures have typically increased by 64% . This should provide a long-lasting fuel to the housing market as Millennials’ economic situations improve.

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