Think prices will drop? They won't. Blame the Millennials!!

[James Carlson]

Are Millennials are to blame for high housing costs? Yes. (Disclosure, I'm a Xennial -- born on the dividing line of 1981.) 

The New York Times has an interesting article out about Millennials impact on the economy, but most interesting for us here ... Millennials are the biggest demographic cohort ever, and they are just entering prime home-buying age. 

Translation: Demand will remain high and prices ain't going anywhere but up.

(Can I brag here and note that I posted the same theory three years ago? Thank you, thank you.)

Some tidbits from the article:

-- People turning 33 and 34 make up the peak of American population

-- There appears to be another similar peak coming 10 years later.

-- The number of 30-to-34 year-olds is about 700,000 higher than those ages 35 to 39.

-- "The demand for entry-level single-family homes should remain high for the rest of the decade,” economists at Fannie Mae noted in a recent analysis.

-- This demand collides with the under-building of new homes that happened after the 2007-2008 recession.

So ... unfortunately, if you're sitting on the sidelines waiting for prices to come down, you're gonna have to wait awhile. 

[Konstantin Ginzburg]

@James Carlson

I suppose I am part of the problem (born in 1986). Whoops.....

But I have been telling other's the same thing throughout the last year. I fully agree with you. There are simply far more people currently looking for a home right now then there are homes for sale on the market. Since the 2008 recession, construction has dropped and has yet to recover back to those levels. In the meantime, the population of the country has continued to grow. This has left a continuously widening market gap between supply and demand. Home prices remaining elevated despite rapid interest rate spikes is a very good indicator for how out of balance the market currently is. This is likely the environment that we will remain in for the foreseeable future. Barring an unexpected flood of housing being brought to market, I do not see a scenario where supply and demand will balance out. Even if construction is elevated back to pre-recession levels (and that's a big if); it will take several years of heightened construction to balance out the supply/demand imbalance.