Millennial Homeownership Rates in the United States

If you’ve looked at the housing market recently, you’ve probably asked a now-common question: How do people afford houses in today’s market? As we’ve discussed in the past, there are still a few avenues for first-time home buyers and other individuals interested in buying a new home. 

But even though home buying opportunities do exist for many people in the United States, many millennials have been struggling to become homeowners. In fact, the millennial homeownership rate is much lower compared to older generations. 

Let’s take a closer look to really understand what’s influencing homeownership among millennials. 

Defining ‘Millennials’

Before we get any further, let’s define what a millennial really is. A millennial is anyone born between 1981 and 1996. They were preceded by Generation X (1965 to 1980), Baby Boomers (1946 to 1964), and the Silent Generation (1928 to 1945). 

Interestingly, Millennials recently became the most populous generation in the United States, according to the US Census Bureau. Here’s how it breaks down:

• Millennials - 72 million+

• Baby Boomers - 71 million

• Generation X - 65 million

But despite being the most populous generation in the US and the biggest pool of potential home buyers, millennials are trailing when it comes to homeownership rates.

Millennial Homeownership Rates

So, how many millennials are currently homeowners? Proportionally speaking, not that many. As of 2020, here’s how homeownership rates break down across the four biggest generations:

• Millennials - 47.9%

• Generation X - 69%

• Baby Boomers - 77.8%

• Silent Generation - 77.8%

Obviously, millennial homeownership rates are much lower than their parents and grandparents. But this is part of a larger overall trend: Each generation since the Baby Boomers has experienced a lower level of homeownership.

Why?

Let’s take a closer look.

Understanding Millennial Homeownership Rates

Context is important to understanding why millennial homeownership rates are so low. Millennials grew up during two different national crises: the attacks on September 11, 2001 and the global recession of 2008. Both events rocked our society, reducing job options and influencing career paths. 

But that’s just the beginning. Here are the bigger reasons millennial homeownership is so low compared to previous generations:

1. Stagnating wages versus rising home prices. The average home price has increased an astounding 88% in the last 10 years. But average income has only increased about 11% in that time period.

With millennials making up a major chunk of the workforce, they represent a large number of working people who are struggling to afford today’s home prices. 

Simply put: Because the cost of living has outpaced wages, many millennials have a difficult time saving for a house. 

2. Increased costs of new construction. New construction costs have outpaced inflation for decades at this point, but the problem really came to a head more recently. The cost of building a new single-family home increased by 42% between 2018 and 2021. 

As the cost of building new homes skyrocketed during COVID-induced supply shortages, buyers and investors slashed spending on residential construction projects. 

That immediately reduced overall inventory, and it further reduced options for first-time home buyers who found building their first home to be even more expensive than ever before. 

3. Low inventory and high competition. Thanks in part to the lack of new construction and economic factors that have delayed homebuying decisions, inventory has dwindled around the country. 

But competition has remained relatively fierce, and that has driven home prices upward. At its worse, we saw some buyers bidding tens of thousands of dollars above asking just to have a chance at getting a new home. 

But competition has also been spurred by the iBuyers and other corporations buying homes around the United States. With lots of cash and tons of determination, some of these corporate buyers are significantly outpacing families in certain towns across the country, especially those cities primed for growth. 

4. Student loan debt. A whopping 60% of millennials say student loan debt has delayed their ability to buy a home, according to data from the National Association of Realtors and the Morning Consult.

With a closer look at the numbers, the above statistic isn’t all that surprising. The U.S. has about $1.75 trillion in total student loan debt, and the average borrower still owes $28,950 (according to the Federal Reserve). In most Pittsburgh residential real estate transactions, that would be more than enough for a down payment, closing costs, and new furniture! 

Creating New Opportunities for Millennials to Buy Homes

In our next article, we’ll take a closer look at how millennials are buying homes. In the meantime, don’t miss our take on how people afford homes in today’s market.

If you’d like to learn more, contact us! At New Local Realty, we’re embodying the principles of New Localism to make homebuying more accessible and the American Dream a reality for people throughout the Pittsburgh region.