Increasing salaries boost younger homebuyers

If income growth is key for greater household formation, housing analysts say some recent progress on the salary front may soon unleash pent-up housing demand among younger adults.

According to a U.S. Census Bureau, all age groups except for those above age 65 continue to experience lower incomes than in 2007. However, a notable change that started last year is continuing among younger households – those under age 35 – who are seeing income gains.

“For individuals in the key household formation period of age 25 to 34, a 0.87 percent decline in median income in 2012 reversed to a 1.1 percent increase in 2013,” noted economist Robert Dietz on the National Association of Home Builders’ Eye on Housing blog. “If these improvements continue, it will be good news for housing demand going forward.”

Indeed, in recent commentary, a Fannie Mae economist notes an improving financial picture for young adults that could help jump-start household formations.