The No. 1 ETF to Profit From the Millennial Housing Boom
- Homebuilders are shifting their focus toward smaller, more affordable homes to cater to the 45 million millennial first-time homebuyers entering the housing market over the next 10 years.
- One way to play this rising trend is a stock fund that’s up 32% this year — beating the market nearly 3-to-1.
One of my favorite pastimes is touring model homes.
Whether I’m accompanying a friend who’s in the market for a new home or touring a new model home to quench my own curiosity and gauge the local housing market, it’s always an enlightening experience.
This past weekend was no exception.
I had an opportunity to visit one of 13th Floor Homes’ new housing developments, and I must say what I saw was an absolute delight.
Their new homes are beautifully appointed.
Builders such as 13th Floor Homes are on the cusp of riding a wave of millennial homebuyers ready to take the plunge and buy their first homes.
Those new homes are smaller, more affordable and more appealing to the 45 million millennials who will buy their first home over the next 10 years.
These 13th Floor homes offer ample space for families of all sizes but are compact — ranging from 1,800 to 2,400 square feet, three to four bedrooms, 2.5 to 3.5 bathrooms, garage(s), new appliances and well-appointed finishes.
You can see what I’m referencing in my snapshots below.
The Millennial Housing Play That’s Beating the Market 3-to-1
CNBC noted this millennial-driven increase in demand in a recent report.
This same report estimates there are 3.1 million more first-time homebuyers now than there were 10 years ago. It also reported there’s “a major opportunity for the U.S. housing market over the next decade with the acceleration of the millennial generation hitting prime homebuying age.”
As Redfin Chief Economist Daryl Fairweather recently announced on HousingWire.com: “Builders [are] finally shifting their focus toward offering smaller, more affordable homes.”
The path to homeownership is a rite of passage for most people, and many millennials are no different.
It’s important to keep in mind that overall, members of the millennial generation are very value-conscious.
This economical mindset stems from their personal experiences living through the Great Recession of 2007–2009.
So, the steady rise in new-home prices in recent years presents itself as a barrier to homeownership for many millennials.
As you can see in this chart, the U.S. average new-home sale price is now $368,000, up 51% since its recent low in January 2009.
This barrier, coupled with historically high student loan debt, a low housing supply and rising rents, can hinder saving the needed down payment to cover the expense of a new-home purchase.
In the CNBC report, David Brickman, CEO of Freddie Mac, said: “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 and we’ve got a deficit of 4 million houses, which drives rents up and creates a tension.”
So homebuilders are changing tactics.
They’re now aiming to build new homes at more affordable prices to satisfy this rising demand.
13th Floor Homes, a top homebuilder in South Florida, is well positioned to meet this growing demand.
In today’s housing market, it’s able to build new single-family homes and price them under $300,000.
As reported in the South Florida Sun-Sentinel, the developer was able to sell out one of its new-home developments in less than two years.
13th Floor Homes’ motto is: “Delivering high-quality, turnkey homes that offer all the amenities of new construction without sacrificing affordability.”
The new-housing trend is not only good news for first-time homebuyers, but also investors who capitalize on it.
To participate in this upcoming homebuying surge, consider investing in the iShares U.S. Home Construction ETF (BATS: ITB).
This exchange-traded fund (ETF) seeks to track the investment results that correspond generally to U.S. stocks in the home construction sector.
The ETF is up 32% year to date, with the potential for more room to grow given the favorable, changing demographics.
Until next time,
Director of Investment Research, Banyan Hill Publishing