Homebuyers are becoming more optimistic, and millennials are finally moving out of their parents' homes, according to one of the most important institutions in the housing market.
Driving up the index is a view that home prices will rise at a slower pace than the current rate over the next 12 months, notes Doug Duncan, Fannie Mae’s chief economist. The HPSI is based on six questions in a survey of about 1,000 homebuyers.
The survey also shows that homebuyers are seeing higher incomes and gaining confidence that they will keep their jobs.
“Certainly, rising home prices mean unless incomes are rising that fast, it becomes a hurdle for buyers,” said Duncan.
Another piece of research from Fannie Mae challenges the narrative that empty-nest Baby Boomers are driving the demand for apartments. Rather, the growth in millennial demand for apartments outpaced that of Baby Boomers by around 10 to 1.
The data from Fannie Mae show that Boomers weren’t taking to apartments all that more fervently than previous generations. From 2009 to 2014, Boomers’ apartment occupancies grew by a mere 5%. However, millennials have been using apartments as their steppingstones prior to their first home purchases, driving much of the demand for rentals.
“Over 90% of the folks that we surveyed who are millennials say they eventually want to own a home,” said Duncan. “But most of them are moving out, as their employment security increases and their incomes rise, into apartments first.”
“We've seen a push on rent prices upward as millennials have been moving out from their parents' basements and becoming renters,” Duncan added.
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