Millennials buying homes in the USA

Who's Buying Homes in the U.S.?

Breaking down the home buying market by generation

In this time of high interest rates and low inventory, cash-flush Boomers have emerged as the market leaders.

Boomer home buyers

Baby Boomers now represent 39% of American home buyers, according to an NAR study, an increase from 29% in 2022, overtaking Millennials.

Home equity, long credit histories, nest eggs and experience in the housing market are all Boomer benefits.

Dr. Jessica Lautz, NAR Deputy Chief Economist & VP of Research says; “The majority of them are repeat buyers who have housing equity to propel them into their dream home – be it a place to enjoy retirement or a home near friends and family. They are living healthier and longer and making housing trades later in life.”

Homeownership study

Generational Trends Study

The 2023 Home Buyers and Sellers Generational Trends report  examines the similarities and differences of recent home buyers and sellers across generations. , found that the combined share of younger boomer (58 to 67 years old) and older boomer buyers (68 to 76 years old) rose to 39% in 2022, up from 29% the year prior. Younger millennials (24 to 32 years old) and older millennials (33 to 42 years old) have been the top group of buyers since 2014, but saw their combined share fall from 43% in 2021 to 28% last year.

Millennials

Millennials' dominance n the U.S. home market dropped from 43% in 2021 to 28% in 2022 due to rising mortgage interest rates, credit tightening, inflation, and retraction of student loan forgiveness plans.

Millennials, defined as those born between 1981 and 1996, are the largest generation in the USA, and they value homeownership. In fact, two-thirds say it’s a central part of the American dream.

As Bankrate’s 2023 Financial Security Index shows, Millennials are better savers than other groups and more aware of the danger of lack of emergency and retirement funds. The Great Recession of 2007-2009, the longest economic downturn in the U.S. since World War II, left a lasting impression on them. Millennials, as a group, are not inclined to ‘throw caution to the wind.’

Home prices remain near record levels due to pent-up demand and low inventory, while mortgage rates have risen substantially and are not likely to see the lows of the early 2020’s again in their lifetimes. The average 30-year fixed rate dropped to a record low of 2.65% the first month of 2021 before spiraling upward to 8.0% in late 2023.

In addition, high inflation, hefty student loan debt, and tightened credit availability combined with soaring rent prices to put the brakes on home buying plans for many Millennials who didn’t purchase pre-2022.

Millennial Homebuyers

Blocks to Millennial Homeownership in 2023

Even those who can qualify for a mortgage with today’s interest rates may not have the funds required for down payment and closing costs, and still have the reserves they–or their mortgage underwriters–deem necessary.

Those in a position to manage it all may not be able to stomach the high payments with only the prediction–not promise–of reduced interest rates in 2024. For a refinance to make sense, Mortgage experts say borrowers will want to achieve an interest rate reduction of at least 0.75% and calculate their break-even point.

Generation X

According to Realty News Report, Generation X made up 24% of total buyers in 2022. They had the highest median household income of any generation ($114,300), followed by older millennials ($102,900). Overall, 79% of baby boomers own their homes, the highest share of any generation, followed by Gen X  at 71%, then Millennials at 52%.

Generation X Gen Xers were the most racially diverse group of buyers in 2022, with 23% identifying as Hispanic/Latino, Black/African American, or Asian/Pacific Islander. They were also the second largest group to purchase multi-generational homes (next to Baby Boomers), to co-habitate with, or care for, aging family members.
First Time DC homebuyers

Generation Z

The eldest Gen Zers were buying houses during the purchasing boom in 2020 and 2021, comprising 4% of U.S. home buyers in 2022. Of those, 30% moved directly from a family member’s home into homeownership. 

Roughly 30% of 25-year-olds in 2022—the oldest of the Gen Zers, (defined as those born from 1997 to 2013), owned a home in 2022, slightly more than the 28% of Millennials and 27% of Gen Xers who owned homes at that age, but lower than the rate for Baby Boomers, who had a 32% homeownership rate at age 25.

Many from Gen Z took advantage of record low mortgage rates and buyer-friendly credit conditions of 2020-2021 to become homeowners. The tight pandemic labor market also offered Gen Z the opportunity to build incomes quickly, and these buyers focused their home searches in smaller, less expensive markets, making down payments easier to afford. The most popular location for Gen Z purchases in 2022 was Virginia Beach, where the median home price was $225,000, compared to Millennials’ preferred location of Seattle, where the median price for a home was $775,000. Gen Z had an obvious advantage in entering the workforce as remote and hybrid work became popular, while others were tied to locations near their existing workplace.

Gen Z