The construction sector and homebuilder-related exchange traded funds probably won’t find support from the rising number of millennials who have shunned new home purchases.
The American home ownership has declined to 64.7% in the second quarter of the year, the lowest level in 19 years, due to rising home prices, increased student loan debt, higher mortgage rates and changing life styles, CNBC reports.
Adding to the downward trend, younger Americans have eschewed purchases and are willing to wait longer. According to the National Association of Realtors, the typical age of first-time home buyers in 2002 was 31. In a Zillow survey of over 100 economists and real estate experts, respondents expect the the age to hit 34 or older over the next decade.
“The millennial generation will have enormous influence in coming years, especially as they hold off on getting married and having children, the two biggest reasons for first-time home purchases,” Zillow chief economist Stan Humphries said in the article. “A lower homeownership rate because of these demographic shifts will have a ripple effect, keeping rents high and potentially impacting the broader economy if substantially fewer people pay property taxes and buy fewer home goods.”
For instance, along with exposure to home construction companies, the SPDR S&P Homebuilders ETF (NYSEArca: XHB), iShares U.S. Home Construction ETF (NYSEArca: ITB) and PowerShares Dynamic Building & Construction Portfolio (NYSEArca: PKB) also include allocations toward home improvement, furnishing and appliances retailers. ITB has the largest weight toward home construction firms at 64.2% of the ETF’s portfolio. [Homebuilders ETFs Still Contending With Tepid Data]
Employment has been a major hurdle for the millennials. Among those between 25 to 34 years old, employment fell to 75.6% in July from 75.8% in June.