Millennials’ Homeownership Rate Trails Older Generations

September 22, 2021
Last updated:
September 29, 2021
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Recent studies have shown that millennials are trailing behind older generations when it comes to homeownership. Thus, in this article, we’ll discuss why this is the case, what factors might be influencing this new home buyer trend, and how things are starting to shift.

Millennials are nearing their peak home-buying age, but they are still trailing previous generations. This is evident, as data from the National Association of Realtors (NAR) shows that less than 40 percent of millennials owned a home just a few years ago. In comparison, almost 40 percent of Generation X and 50 percent of baby boomers owned a house or a residential real estate property during the same time period. Yet, even despite these numbers, more millennials were expected to start families and begin buying homes in droves once they reached their 30s. However, a significant number of millennials seem to still be trailing behind older generations when it comes to homeownership, which raises the question: Why aren’t millennials becoming first-time homebuyers?

Why Are Millennials Trailing Behind Older Generations When It Comes To Homeownership?

It is clear that millennials are not becoming homeowners at the rate that their parents and grandparents did. But that does not mean they have given up on the idea altogether, as more than two-thirds of millennials still want to realize their dreams of homeownership. Yet, the age-old stigma that millennials do not want to buy homes because they cannot afford them is still looming, even though it is really not a question of affordability per se. Rather the millennial generation has been hit hard by economic recessions, student debt, and a higher cost of living. And all of this affects a first-time home buyer and subsequently impacts their credit score, financial resources, and ultimately makes buying a home or qualifying for a mortgage more difficult than ever before.

On top of these challenges, millennials and younger borrowers have different priorities than their parents did at the same age–whether it is in relation to owning a house, having a big family, or some other key milestone. Some even view homeownership as antiquated or too expensive for their lifestyle choices today.

What Are The Contributing Factors That Have Proceeded This New Home Buyer Trend?

Believe it or not, the number of people that own homes in the U.S. is changing, and there are a lot more reasons than you might think. In general, the homeownership rate has always been influenced by changes in underlying demographic forces like aging populations and shifts in employment patterns for men and women. Housing market conditions also affect how many first-time homebuyers enter into real estate sales transactions each year. What’s different now is the impact of critical lifestyle trends on this equation and the presence of student loan debt that weighs heavily on young potential buyers’ finances and credit scores.

Moreover, when coupled with rising rents, fluctuating home prices, and living paycheck to paycheck, those who want to buy cannot even afford a new home–let alone their current rent payments (ex. an increase from $1k/month to $2K monthly). As a result, mortgage affordability, being able to qualify for a home loan, and having access to income that allows a young buyer to make a competitive offer (above a home’s listed price) are still just out of reach for some. But there is a bright side here. Thanks to the U.S. Department of Housing and Urban Development, new federal policies and programs are continually being implemented to address America’s housing needs.

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What Can Millennials Do To Realize Their Dreams Of Homeownership?

As of late, more and more millennials have realized their dreams of buying a home. In fact, this generation’s homebuyer rate has reached 48 percent, up from 40 percent three years ago, which is a good sign. This sudden increase in millennial home purchases can be largely attributed to the many people who have been able to save up money and therefore are now in a better position to afford a down payment, a future mortgage payment, and closing costs. Plus, as briefly mentioned, there is a variety of federal/government, lender, and state loan programs for first-time buyers. These programs make it that much easier to qualify for a home loan, maintain your mortgage payments, and cover all the costs associated with owning a home–property taxes, homeowners insurance, maintenance fees, and other home-related costs.

Likewise, having freedom or agency to work from anywhere these days and a much-needed reprieve from crushing student loan debt over the past year definitely made it easier for those looking to buy their first home. Furthermore, with historically low mortgage rates, a plethora of first-time buyer programs, HUD (housing and urban development), first home resources, mortgage payment, and closing cost assistance, plus more, making a home purchase is now within reach.

But be that as it may, the latest challenge causing millennials to be slower to purchase homes than previous generations is actually a challenge for anyone in the market currently for a new home—low inventory. This is especially true with starter homes. But the good news here is that now in a better position financially, millennials need only prepare for the home buying process and take the necessary steps to become competitive buyers in today’s U.S. real estate market:

  • Get pre-approved
  • Work with a knowledgeable mortgage loan professional/lender.
  • Begin your future house hunt/search with a local real estate agent –just to name a few.

Overall, millennials are shaping the future of American life, and nowhere is it more evident than in real estate. Despite growing up in an economy fraught with uncertainty, home purchases are starting to trend upwards among millennial first-time homebuyers, which means there is hope for those who want the American dream after all. And with low interest rates, an increase in residential construction, and some creative financing options available to young buyers–like a Federal Housing Administration (FHA) loan–becoming a homeowner right now never looked better. Additionally, with home loans for veterans (VA home loans), federal and local government grants, and even more first-time home mortgage programs than before, first-time home buyers and borrowers that qualify can get a mortgage and embark on the process of buying a home.

That said, millennials are poised to be the dominant force reshaping the currently rebounding economy – with implications for everything from work culture to leisure activities. And since millennials are the largest and most diverse generation in history, trailing behind other generations when it comes to buying their first home will soon be a thing of the past. This is especially true now that millennial first-time homebuyers can finally start saving, have multiple streams of income, and build stronger credit scores. Plus, with the possibility for partial or even full student loan forgiveness on the horizon, you can expect an even greater influx of first home buyers in the near future.

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Ready To Make A Home Purchase?

Are you curious about mortgages and the home buying process? Or are you wondering what first home loan programs are available in your area? If so, Sammamish Mortgage can help. We are a local mortgage company from Bellevue, Washington, serving the entire state, as well as Oregon, Idaho, and Colorado. We offer many mortgage loan programs, borrower resources, and expert real estate assistance to buyers all over the Pacific Northwest and have been doing so since 1992. Contact us today with any questions you have about mortgages.

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