Demographics of the new American Homeowner

April is traditionally seen as the beginning of the homebuying and selling season throughout much of the U.S. As things get underway once again for 2017, the market looks poised to log yet another impressive year.

CNBC reported that as early as January, the construction of new housing already began exceeding expectations . Approximately 1.25 million new home starts were reported in January, up from a revised projection of 1.22 million. In addition, permits for future construction were nearly 5 percent higher than the previous month.

This increase in construction is a sign of optimism, especially among the larger economic backdrop of rising interest rates. While home values have regularly risen for the past few years, so has the cost of obtaining a mortgage. According to CNBC, some economists and analysts are concerned this could lower the demand for housing in the near future. However, higher rates of employment and better compensation have also driven growth in the market.

Homes remain a sound investment

For decades, much has been made about the financial savvy of the American homeowner. Instead of throwing money away renting an apartment without gaining any legal, financial or psychological sense of ownership, buying a home has long been considered the smartest of smart investments. However, the economic reality has changed drastically in just the last decade. As a result, what used to be common sense money advice has largely been cast into doubt.

"Homeowners can break even quickly in many parts of the U.S."

A survey from real estate service Zillow provides a compelling argument  against what some see as the futility of homeownership, but still remains realistic about the prevailing market conditions. In a broad analysis of real estate prices in a variety of major U.S. cities, along with data surrounding the personal financial habits of the typical American, Zillow was able to glean some cold hard facts surrounding this oft repeated adage.

Precisely what they found is mostly encouraging for real estate professionals. Throughout the U.S., it takes just under two years on average for a homeowner to break even on their purchase when compared with renting an apartment in a similar location. While this may be a reliable benchmark, it can vary wildly depending on where in the country the buyer is located. Zillow found that in some of the fastest-growing yet most expensive markets, it could take twice as long to reach the same point of financial solvency.

The metro area that took the longest to break even on average was Washington, D.C. This should come as little surprise to those who know that the nation's political capital is also perhaps the capital of high rents and pricey homes. According to Zillow's analysis, it would take the typical homeowner four and a half years to break even on a home purchase in the D.C. area. Los Angeles clocked in at just over four years. The greater metropolitan area of New York City tied with Boston at just over three years. Among the fastest-growing job markets, Dallas tracked the shortest break even amount. The average homeowner in this northern Texas city can expect to break even on their purchase in a little over a year when compared with renting.

Millennials feel priced out

Even at the highest end of the break-even spectrum, it's clear that a home is still a wise long-term investment for those with enough capital to make it. Unfortunately, much of what is now the biggest generation by population size may not be in such a position. Zillow noted that those under 35 may not be able to take advantage of the favorable economics of homeownership in many of the fastest growing metro areas, even with the potential to recoup their investment in a few years. That's because, according to data from the U.S. Bureau of Labor Statistics, most Americans between the ages of 25 and 34 don't have the job security to make this reasonable. The BLS reported in 2014 that the average working-age millennial  stays in a job for just three years at a time.

For young workers in expensive cities, this may mean they are out of luck for many years if they wish to make the financially savvy move to purchase a home. In some cases, even if a mortgage would be less than the rent they currently pay, other factors like a large down payment or lack of credit history needed for a loan create a high barrier to surmount for this demographic.

What can younger generations do get in the housing game? Most likely, the same advice as always still applies: Keep saving, pay bills on time and don't worry too much about what's impossible to control.

For more information on mortgages, contact your local Vectra Bank.