Who is buying up all the homes today? While the market is slowly normalizing, millennials have firmly positioned themselves as the dominant force. As the largest generation in the U.S. population, these individuals born between 1981 and 1996 or 27-42-year-olds, are not only influencing trends, but also facing unique challenges in their quest for homeownership.
Challenges in the current market:
According to a recent Redfin report, 2023 was labeled the least affordable year on record for homebuyers, with the median monthly housing payment hitting an all-time high of $2,715, representing a 12.6% increase from the previous year. (This is about $400 more a month than in 2022 and can be directly connected to the interest rate changes.) The ongoing housing shortage, coupled with a significant rise in interest rates, has made home prices and monthly payments seemingly out of reach for many first-time buyers.
Despite these challenges, millennials entering their prime home-buying years are buoyed by positive factors such as wage growth and accumulating financial wealth. The real estate market anticipates that these tailwinds will sustain housing demand throughout 2024.
Millennials and homeownership:
In 2022, a significant milestone was reached as more than 50% of millennials became homeowners, according to the U.S. Census Bureau Current Population Survey. This surge in homeownership was largely attributed to favorable conditions in 2020 and 2021, including low interest rates and increased opportunities for remote work.
However, the landscape has shifted since then. The National Association of Realtors (NAR) reports that the qualifying income required for the average starter home rose to over $96,000 in the second quarter of 2023, more than doubling the $49,000 needed in 2020.
Key statistics reflecting millennial influence:
- In 2022, millennials constituted 26% of U.S. adults.
- 54% of purchase mortgage applications in 2022 came from millennials (CoreLogic).
- From July 2021 through June 2022, the younger millennials dominated the market by starting their home-buying process online (NAR).
- 70% of younger millennials and 46% of older millennials were first-time homebuyers from July 2021 through June 2022 (NAR).
- In 2022, 62% of 40-year-olds were homeowners, compared to 69% of baby boomers at the same age (Redfin).
Tips for millennial homebuyers:
For those of you aspiring to homeownership, the following tips can be instrumental:
- Leverage your agent’s expertise for a smoother home-buying process.
- Explore first-time homebuyer loans and programs for financial assistance.
- Consider the long-term when selecting a home to minimize transaction costs.
- Capitalize on your education and critical thinking skills to navigate the complex real estate landscape.
As the largest generational group in the U.S., millennials, with an estimated population of 72.24 million, are set to remain a major force in the real estate market for years to come. Despite current challenges, their resilience, combined with strategic approaches, positions them to continue shaping the future of homeownership in our country, and more importantly, here in our little slice of the CSRA.
All in all, I can say the forecast for 2024 is looking bright, election years always bring anticipation for improvements. Hopefully, the interest rates will continue to regress, and even an uptick in sales prices and competition will be well received as the overall cost will be decreased to us all in the long run.
