millenialsSince 2008, navigating the real estate market has required more delicacy than walking through a china shop blindfolded. While real estate, like the financial markets, will always hold an air of mystery to the average person, stability may be on its way this year.

But why 2015? It seems that for years, “experts” and “insiders” have promised a turn in the markets. What has changed in the last year?

The answer is: America’s largest demographic.

 

For the past decade, Baby Boomers have dominated America’s demographic. They are the largest portion of the U.S. population and, therefore, affect economic trends. For years, Baby Boomers have been transitioning into or living in retirement. They are less likely to be buying homes or moving; instead, they’ve settled down a long time ago.

However, a critical shift has taken place in the past year. The Census Bureau announced earlier in 2014 that Millennials (individuals between the ages of 20 and 30) are now the largest population cohort in the U.S. Millennials are vastly different from the Baby Boomer generation, many reasons of which affect the real estate market. First, the younger generation is much more optimistic about the future than their parents’ generation. Their investment risk tolerance is higher and many are in a key time of life where they want to build their assets, including buying a home and starting a family.

Jonathan Smoke, chief economist at realtor.com, shared with FORTUNE magazine that Millennials will “drive two-thirds of household formations over the next five years.” He believes this push in the housing market will be noticeably present starting this year, especially in the Midwest where single-family homes are more affordable. In more expensive markets, particularly San Francisco and New York, economists believe Millennials will continue to demand housing, mainly townhouses and condominiums. To meet demand, we can expect more construction and more purchasing opportunities.

While just a few years ago many argued that Millennials were the generation responsible for dragging down the real estate market, recent job growth and decreasing unemployment rates have changed that. Young professionals are finding jobs more easily and employment rates have particularly risen for those aged 25 to 29. Add in the forecasted addition of 2.5 million jobs this year, as well as an increase in housing construction, and we can expect a jump in first-time homebuyers.

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