Housing market is primed for millennials in 2015

by MPA23 Jan 2015
Owners of the country's lowest valued homes emerged from 2014 in a stronger position than previous years, with home values up 6.8% year-over-year.

Lower-valued homes were hit harder by the housing recession than luxury and high-end homes, and had a less-steady recovery. But 2014 saw a solid comeback for those homeowners whose home values are in the bottom third of their markets, according to the fourth quarter Zillow Real Estate Market Reports.

While homeowners in the bottom price tier are still 17% shy of their pre-recession peak values, the group has made significant strides from the 31% value loss they suffered when home values hit rock bottom in January 2012.

According to Zilliow, the returning value means many with lower-valued homes, who had been in negative equity, are now able to sell or refinance— boosting low-end inventory, which has been tight for the past few years.

Going into the home-buying season in 2015, homebuyers can expect to find more homes on the market and less competition from all-cash bidders. Metros with the biggest jump over last year in low-end inventory are Las Vegas, with 66.9% more low-end homes on the market in December 2014 than December 2013, Riverside, with 47.3% more and Washington, D.C. with 45.7%  more. 

Homeowners of lower-valued homes are emerging from negative equity and are able to sell just as many in the millennial generation prepare to buy homes, pushed into the housing market by rising rents and abysmal rental affordability. Zillow expects millennials to overtake Generation X as the top home-buying generation in 2015. 

"In many ways, for the housing market to fully normalize, it has to start at the bottom," said Zillow Chief Economist Dr. Stan Humphries. "More lower-end home sellers will help meet demand from entry-level buyers, and these sellers in turn will re-enter the market in search of a slightly pricier home, which will entice more middle- and upper-tier sellers to list their homes. As the economy gets stronger, we expect more young adults to strike out on their own, moving out of friends' and parents' homes. This will create strong demand in coming months, especially for less expensive homes."

Rents continued to rise, and at the end of December the Zillow Rent Index had increased 3.3% year-over-year, to $1,345.

Below is data for the fourth quarter of 2014.

MetroArea

Home Values

YoY %Change

Low-Tier Homes

Change in Inventory

United States

$  179,200

6.6%

6.8%

12.2%

New York/ Northern New Jersey

$  385,400

5.2%

6.3%

16.8%

Los Angeles

$  532,900

5.8%

10.2%

16.1%

Chicago

$  189,500

5.8%

3.7%

16.0%

Dallas-Fort Worth, Texas

$  152,600

8.2%

8.9%

-9.5%

Philadelphia

$  204,300

5.0%

5.3%

4.5%

Houston

$  152,600

12.3%

17.5%

-9.2%

Washington, D.C.

$  366,000

5.3%

10.4%

31.5%

Miami-Fort Lauderdale

$  211,900

14.7%

19.6%

23.7%

Atlanta

$  155,000

12.2%

20.3%

16.6%

Boston

$  370,000

5.4%

7.9%

11.7%

San Francisco

$  706,600

8.3%

16.3%

1.3%

Detroit

$  115,700

9.8%

5.8%

16.0%

Riverside

$  283,800

10.2%

14.3%

36.0%

Phoenix

$  199,500

2.9%

4.0%

5.3%

Seattle

$  341,200

7.3%

9.9%

7.3%

Minneapolis-St Paul

$  214,900

7.6%

6.4%

18.1%

San Diego

$  469,400

4.5%

8.4%

29.7%

St. Louis

$  130,600

2.4%

0.0%

5.2%

Tampa

$  148,600

10.5%

9.7%

9.2%

Baltimore

$  244,000

2.7%

3.1%

24.1%

Denver

$  282,100

13.5%

17.1%

-25.3%

Pittsburgh

$  125,500

5.6%

1.4%

1.9%

Portland

$  279,800

6.4%

11.0%

3.7%

Sacramento

$  332,100

7.3%

12.2%

32.2%

San Antonio

$  144,800

5.5%

6.4%

2.2%

Orlando

$  170,600

11.1%

14.1%

33.9%

Cincinnati

$  138,600

6.0%

2.3%

2.1%

Cleveland

$  121,500

3.6%

1.5%

4.8%

Kansas City

$  138,000

5.7%

6.0%

-2.2%

Las Vegas

$  185,600

10.9%

13.8%

29.1%

San Jose

$  837,900

10.4%

13.4%

-2.8%

Columbus

$  145,600

5.4%

2.8%

-13.8%

Charlotte

$  158,100

5.9%

3.4%

-10.7%

Indianapolis

$  128,100

-1.0%

11.3%

4.2%

Austin

$  221,000

11.1%

N/A

7.6%

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