Home-buying a dream delayed for many millennials

J.T. Woodard said he feels lucky to have found work at an Apple store in Houston six years ago. It may not be his dream job, but it covers the bills. He's paid off his car and can even put some money aside in savings.

But the 24-year-old hasn't been as lucky navigating Houston's housing market. Woodard lives at his parents' Briar Village home in west Houston. He says rents are pricey and he'd rather wait until he can afford to qualify for a home loan.

"I looked at a couple of places inside the Loop and even though I make a decent amount of money, the rents were still pushing my budget," he said.

Woodard is part of the generation that economists say is key to the continued recovery of the local and national housing markets. Millennials, born between 1980 and 2000, will make up half of the nation's workforce by 2020.

Harvard study: Explore the interactive map to see how much of their incomes Americans spend on housing.

Tight credit, high un-employment and record levels of student loan debt are moderating growth and keeping young people and other first-time homebuyers out of the market, says the State of the Nation's Housing report released Thursday by the Joint Center for Housing Studies at Harvard University.

"Young people are always important to the housing market," Chris Herbert, research director at the Joint Center for Housing Studies, said in a panel discussion Thursday.

The study found that about 2.1 million more American adults in their 20s lived with their parents last year. The percentage of 25- to 29-year-olds living at home increased to 20 percent in 2013, up from 15 percent a decade earlier.

Meanwhile, the share of households aged 25–34 with student loan debt soared to 39 percent from 26 percent between 2001 and 2010, the report shows.

"It's no surprise these 20-year-olds are living at home; they can't get the financial independence they need," Herbert said.

The study found a third of total households in the Houston region, which includes Sugar Land and The Woodlands, are considered cost-burdened, meaning they spend more than 30 percent of their income on housing. Some 47 percent of renters in the Houston region are in that category.

Bruce McClenny, president of Houston-based Apartment Data Services, said rents across the region have increased 6.8 percent over the 12-month period that ended in May. And Houston is still catching up from not having enough supply on the market, he said.

"The main reason rents are able to rise goes back to supply and demand," McClenny said. "Many people are coming to the city looking for an apartment and there's not much availability. ... Developers do tend to overdo it but haven't yet. We still do have a lot of people coming here and a need."

Daryl Carter, chairman of the National Multifamily Housing Council, said in a few markets, including Houston, Austin and Washington, D.C., developers should be cautious to not overbuild multi- family projects. He said construction has accelerated in markets that have seen job growth and developers are building to meet the demand for apartments and single-family homes.

He said it's important to be mindful of what the renters can afford versus what they have to pay.

"Unfortunately with the cost to develop today, the number of renters that can afford that level of cost is really a challenge," Carter said. "Everybody wants the Google workers who make six figures, but there aren't that many of them. The bulk of millennials don't make that much starting out."

A recent Greater Houston Partnership analysis found that developers are building - a lot. The city of Houston set a record for the value of construction permits issued here three months in a row. The running 12-month total in May topped $7.3 billion, the highest value since the partnership began analyzing the records in 2002.

This represents a 39.3 percent increase from the same time last year. In May, residential permits increased 65 percent to $367 million, with multifamily permits accounting for all the year-over-year growth.

Ryan Epstein, Houston-based CBRE's vice president specializing in multi-family investment sales, said there is a concern about affordability in the region's rental market and there could be an opportunity for midlevel rents in some markets.

"The vast majority of everything being built is on the high end," Epstein said. "There's a massive gap where A and B rents are."

Luis Torres, a research economist with the Texas A&M Real Estate Center, said that while Houston remains relatively affordable compared with the rest of the state, builders are producing "bigger houses at a bigger cost" because of the steep land prices and low inventory. This dynamic, he said, will hurt first-time buyers and the middle class.

He said the housing market in 2014 will continue to grow. But it could be challenged by higher mortgage rates and prices, tighter lending standards, limited availability of developed lots, labor shortages and construction cost increases.

"Prices will to continue to rise given the low inventory available and high construction and labor costs," Torres said.