Are Millennials Beginning to Buy Homes?

Are Millennials Beginning to Buy Homes?

By Dikran Seferian August 25, 2022

It goes without saying that buying a house nowadays is not as easy as it used to be, and the main victims are often millennials. It’s not because they prefer living with their parents, or because they don’t consider buying homes a worthy investment. The reason is as simple as it gets: lack of affordability. They simply don’t have the financial comfort to become homeowners. Recent shifts in the market, however, have been changing the game in the favor of millennials. As a matter of fact, the same generation that couldn’t afford to own a home is now becoming the fastest growing group of buyers. 

Why Has It Been Harder for Millennials to Buy Homes?

The skyrocketing prices of homes and mortgage rates aren’t the only reason millennial homeownership has been suffering. This lack of affordability can be traced back to several factors. 

The Great Recession and the Housing Bubble of 2007

A housing bubble essentially takes place when high levels of demand lead to an increase in home prices. Investors in the early 2000s opted for non-stock investments while the Federal Reserve System reduced mortgage rates.

This resulted in huge demand for homes. It’s also worth mentioning that, due to limited regulations, one didn’t need to have significant credit or high income to obtain a mortgage. But the payments eventually caught up, and with higher interest rates. As expected, borrowers couldn’t pay up, resulting in the lenders going bankrupt. The collapse of the global banking system soon followed, leading to the Great Recession.

As such, homebuilding saw a massive slowdown and never really returned to normal levels — even after the economy started picking back up. Nevertheless, mortgage rates began decreasing again and homebuyers kept increasing, and when demand exceeds supply, prices start climbing — much to the dismay of millennials.

A shortage of homes for sale in addition to rising demand resulted in skyrocketing prices.

A shortage of homes for sale in addition to rising demand resulted in skyrocketing prices.

Prices of Homes Outpacing Incomes

With prices over the roof, incomes are having trouble keeping up. Reports indicate that the median prices of homes increased by 30 percent while median wages grew by only 11 percent over the past 10 years. Median home prices were as little as four times the median income before the collapse of the market in 2008. Today, that ratio has grown to be more than seven times a homebuyer’s median income — after hovering around five to six for a while.

For instance, the median home price in 1990 used to be roughly $121,500 with the median income being around $50,200. Fast forward to 2020, the median home price grew to almost $358,700 while the median income barely made it to $67,521. 

Lack of Supply

After edging out boomers, millennials became the largest generation of adults in 2019 — around the same time when they showed a desire to become homeowners. The rate of millennial homebuyers was picking up just before the pandemic. But the aging population of boomers often chose to keep their homes, leading to a shortage of homes on the market amid high demand. It’s also worth mentioning that a lot of boomer homebuyers are already homeowners, allowing them to make more competitive offers thanks to their home equity. 

Competition from Investors

With fewer families being able to afford properties, investment companies have interfered to buy homes. The investors would then lease them at a premium. Although it’s not exactly a new practice, it is certainly becoming a more common one. The investment firms have mainly been aiming for single-family properties — the type that the millennial majority is seeking to buy.

Single-family properties were the main target of investment firms.

Single-family properties were the main target of investment firms.

The Burden of Student Loan Debt

A lot of studies have revealed that student loan debt is a major reason why millennials are postponing homeownership. The rate of millennial homebuyers falls behind those of both boomers and Gen X back when they used to be the same age. While the pandemic saw a slight rise in the millennial homeownership rate, it is believed the student loan pause played a key role in letting that happen. Although prolonging the pause on student loan debts may encourage millennials to buy properties, the supply of homes needs to meet the demand in order for the market to be more welcoming. 

How Millennials Are Altering the Housing Market to Their Favor

Changing the Process of Buying Homes

Due to the impact of the Great Depression, combined with the burden of student debt, millennial homeownership is witnessing a considerable delay. Research shows that an unprecedented 52 percent of millennials are choosing to stay with their parents as a result of inflation as well as the pandemic.

Establishing families later than usual is another factor that could be contributing to the delay in homeownership. Only 46 percent of millennials are reported to be married as opposed to the whopping 83 percent of the Silent Generation back in their day. 

The Role of Technology

Technology has proven to play a major role in the process of buying homes, with millennials using online sources to search for and buy property. A recent report indicates that 99 percent of the millennial population makes use of the internet to browse the housing market — whether for condos or townhouses or anything else. This number is almost twice as much as that of boomers who use the web to find homes. 

The online housing market became the norm for millennials.

The online housing market became the norm for millennials.

The Introduction of Online Mortgages

The source of information regarding mortgage options in the past was either the bank or a realtor. Nowadays, the internet is the go-to choice for mortgage shopping. What draws the younger generation to the internet also holds true for online mortgages. This includes on-demand service, fast digital communication, and simple user experiences. It comes as no surprise that, as of 2017, six lenders out of the top ten were non-bank sources. 

Access to Options

Another effect of the internet is that it has given the average millennial homebuyer an arsenal of information to make the right choices. The same goes for mortgages, too. Studies have revealed that millennials obtained twice as many mortgage quotes on average than boomers, prolonging the process of home-buying as a result. A myriad of options through online sources, difficulty with saving money, and low supply are all key factors of the extended buying process.

Mortgages are twice as popular among millennials than they are among boomers.

Mortgages are twice as popular among millennials than they are among boomers.

Changing How Real Estate Agents Work

Previously, the value of real estate agents mainly had to do with the information they could provide. But now that homebuyers can access all that information from the internet, realtors now have to rely on their connections, negotiation skills, and how they can make the buying process as smooth as possible.

Let’s not forget that many millennials also prefer to communicate with real estate agents via text rather than over the phone. Also, photos of homes often don’t suffice as live streams and video tours have become preferable. 

When buying homes, millennials typically prefer live streams and video tours over photos.

When buying homes, millennials typically prefer live streams and video tours over photos.

Different Approaches

Even with the delays and extended processes, the rate of millennial homeownership is on the rise. But how many millennials own homes? The latest studies have revealed that 53 percent of them are homeowners. The survey also showed that due to the increasing demand, families are opting to buy and renovate homes that are older and less expensive — others even choosing to go for tiny houses on wheels.

Meanwhile, the tendency towards online means has significantly altered many aspects of the housing market, and may eventually lead to a more streamlined process of buying and selling property. Millennials are ultimately taking a different approach to the way they shop for homes.


Written by
Dikran Seferian

Written by Dikran Seferian