Taylor Morrison Home CEO Sheryl Palmer sees a major opportunity for the U.S. housing market over the next decade with the acceleration of the millennial generation hitting prime home-buying age.
“We have a huge wave coming at us over the next 5-10 years. It’s one of the reasons I’m so bullish,” Palmer told CNBC’s Diana Olick at the network’s Capital Exchange forum in Washington D.C. on Thursday.
Nearly 45 million Americans will reach the general age of first-time home buyers in the next 10 years, 3.1 million more than in the 10 years prior, according to a recent analysis by Zillow.
There’s just one catch: Fewer millennials can afford to buy a home. The homeownership rate among millennials is about 8% lower than previous generations at the same age, according to the Urban Institute, which noted factors like delayed marriage, student loan debt and higher urban living prices holding them back.
Additionally, over the last five years, prices for starter homes have increased 57%, while inventory is down 23%, according to Zillow.
“I am excited because the demographics are with us. Now we have to figure out how to build [new homes] … at the right price,” Palmer said.
David M. Brickman, president and incoming CEO of Freddie Mac, said there needs to be a great supply of new homes at lower price points.
“The problem is we don’t have enough housing in aggregate. We need about 1.5 million homes each year, and we’re barely at 1.2 million. We’ve been running at that level, we’ve got a deficit of 4 million houses, which drives rents up and creates a tension,” he told Olick at the event.
Brickman added that younger people cannot afford to buy homes at the same age as their parents previously did, reflecting the shift towards rental housing and away from owned housing among younger cohorts.
In fact, over one in five, or 22 percent of millennials, are staying home or returning to living in childhood homes, according to Zillow.