Millennials make up an even greater share of the housing market since the onset of the Covid-19 pandemic – but are their preferences as a generation reshaping the market, or are millennials having to adapt to what's available?
Millennials are ready to become homeowners, but the demographic has aged into the market at the worst possible time.
By virtue of sheer numbers, millennials are defining the trends of today’s housing market. The age group now accounts for 43% of all homebuyers so far in 2022, according to a new report by the National Association of Realtors.
There are now more millennials—defined as being born between 1980 and 1998—buying homes than any other generation, and their share of the home buying market is only growing -- up from 37% last year.
Older millennials -- born before 1989 -- make up a larger share of new homeowners than younger members of their cohort. These older homebuyers appear to have utilized opportunities afforded to them by the last two pandemic years to save up money and enter the housing market.
But as millennials begin to consider homeownership, they are also being confronted with one of the most competitive, expensive, and unforgiving housing markets of recent times.
Housing prices have risen by nearly 20% over the past year—a record high well above the 14% year-over-year increase in home prices that was recorded shortly before the 2008 housing burst, with even more home price growth expected to hit over the next few months before cooling.
A low supply of available housing influenced by inflation and supply-chain issues has coincided with a record demand for new houses, as low mortgage rates and pandemic-era remote work options drew more potential home seekers into the market.
The second largest home buying demographic behind millennials, with a share of 29%, are baby boomers. But while those defined as being in Generation X and some younger boomers are hunting for larger family houses, baby boomers looking to downsize and millennials buying their starters seem to be searching for the same thing – suburban homes that are similarly sized and priced.
This usually wouldn’t present an issue but given the supply crunch of housing and the high number of millennials entering the housing market, it has become one.
Boomers have been out pricing millennials in the housing market for months, and a big reason for that is the difference in wealth that booms have been able to build over the years – particularly from owning real estate.
A recent study by credit building company Self Financial found that the average net worth of baby boomers absolutely dwarfed that of millennials, with the gap in real estate assets alone standing at over $11 trillion.
There might still be hope for millennial homebuyers, as some housing markets have shown to be much more welcoming than others. A February study by online loan operator Lending Tree found that in Denver, Seattle, and Boston, over 60% of mortgages were offered to millennials