First-time homebuyers, traditionally buyers who are 25-34 years old, are beginning to look a bit older.

Homeownership rates among this age group dropped disproportionately after the 2008 recession and have not yet recovered.

The homeownership rate dropped from:

    • 46% in 2008 to 41% in 2012 for 30-34 year olds; and
    • 34% in 2008 to 29% in 2012 for 25-29 year olds.

This drop is partially due to the fact that they simply can’t afford to own anymore. The labor force participation rate (LFP) has correspondingly declined among the first-time homebuyer demographic, dropping from:

  • 91% in 2008 to 89% of 30-34 year olds in 2012; and
  • 88% in 2008 to 87% of 25-29 year olds in 2012.

These young adults, members of Generation Y (Gen Y), had the misfortune of entering the labor force at the outset of the 2008 recession and stumbling recovery. Even if they were able to find a job, in most cases the pay was less than expected. Thus, with diminished incomes — and in some cases no income — Gen Y continues to wait on the ownership sidelines and put off homeownership. And to make matters worse, many members of Gen Y are saddled with crippling student debt, further taxing their already strained finances.

It’s not all bad news, though. Looking forward, the potential first-time homebuyer demographic is rising in California, increasing by nearly 300,000 from 2008-2012.

Thus, expect first-time homebuyers to show a strong showing – once they find jobs and accumulate enough savings for down payments. This is expected to occur in the 2018-2020 period. At the same time, Baby Boomers going into retirement are going to be looking for replacement homes.

Prepare for this Great Confluence of real estate activity by focusing your efforts to the city-centers, where Gen Y and Baby Boomers both are most likely to buy in the coming years.