Millennials (myself included) are often seen or portraited as not having our priorities straight. As a matter of fact, the most popular (and sort of funny) narrative is that millennials prioritize avocado toast and cappuccino over homeownership and that is why most millennials cannot purchase a house. Well, I am here to tell you that is an entrenched myth.
In reality, millennials face various challenges that impede their ability to enter the housing market. This analysis aims to debunk this myth by delving into the data on millennial homeownership rates and exploring the factors that contribute to their lower share in the real estate market. By going over historical data and current trends, we aim to shed light on the true reasons behind this phenomenon.
The Rise of Millennials and Home Buying Age
As of 2023, millennials constitute the largest generation of Americans, making up a significant portion of the population. The median age of first-time homebuyers has risen to 36, the oldest seen since data collection began in 1981. Traditionally, first-time buyers were aged between 28 and 33. The red line on the graph representing U.S. population by age highlights this shift.
Despite their numbers, millennials continue to have a lower share of first-time homebuyers in the market. Historically, the annual share of first-time buyers stood at 40% of all primary residence buyers, but it has dwindled to 26% in recent years. Factors like low housing inventory, rising home prices, and higher interest rates contribute to this decline.
Financial Hurdles and Debt Accumulation
Millennials face various financial hurdles that hamper their ability to save for a down payment. Multiple debts, including high rent, car loans, credit card debt, student loans, and childcare costs, keep them from achieving homeownership. While recent decreases in rental prices are a welcome relief for some, the burden of student debt remains significant, even with temporary payment pauses.
To understand the real impact of millennial homeownership, we compare their homeownership rate with previous generations. While there have been reports of improvement in the homeownership rate for those under 35 from 2021 to 2022, it is still below the average homeownership rate of 39.7% for baby boomers and Gen Xers at the same age. This comparison offers valuable insights into the challenges millennials face in entering the housing market.
Despite being the largest adult generation in the U.S., millennials saw their share of buyers in the housing market decline last year. This is surprising, considering that millennials are now at the age when previous generations typically entered the market or established households. However, older generations, particularly baby boomers, gained the upper hand, primarily due to their ability to pay all cash for home purchases. With 51% of older boomers and 32% of younger boomers paying all cash, they emerged as the victors in competitive bidding wars.
Millennial Homeownership Rate: A Comparative Analysis
Housing affordability and accessibility to homeownership continue to drive shifting moving patterns, as indicated by a report released by Realtor.com. During the first quarter of 2023, nearly 60% of all listings page views from the top 100 metropolitan areas were for properties located outside of the viewers’ current neighborhoods. This represents a 4.1% increase from the previous quarter and a 3.3% increase from the same quarter in 2022. Of these out-of-metro viewings, two-thirds were in areas with higher homeownership rates than where the viewers currently resided.
Additionally, half of these viewings were in areas that were more affordable than their current locations. This trend can be attributed to high home prices and the growing prevalence of remote work, which enables homebuyers to explore markets beyond their own neighborhoods, offering greater housing affordability and fewer obstacles to homeownership.
My Personal Take
In conclusion, the notion that millennials prioritize indulgences like avocado toast and cappuccino (Vietnamese coffee in my case) over homeownership is absolutely bullsh*t. Despite being true to very limited extent, I hope many people can see millennials are facing many challenges that impede their ability to enter the housing market against other groups, especially those who come from generational wealth.
Only through understanding the nuances of various datasets and reports, we dispel myths and pave the way for a more equitable housing market for future generations. Ultimately, policymakers and stakeholders must collaborate to devise strategies that support millennials in their quest for homeownership. By addressing student debt, improving affordability, and creating opportunities for saving, we can enable more millennials to achieve their dreams of owning a home. And we hope with the upcoming election, some positive changes will arrive soon.
If you have any question, comment, or concern, feel free to reach out to our team at info@chadvorealestate.com.