The Millennial Generation is currently the largest living adult group in the U.S, outnumbering the Baby Boomers. Millennials are responsible for more than half of new home loans. They are at the prime home-buying age – mid-twenties to late thirties – and have been entering the housing market in surges for the past few years. The NAR shared this generation made up 38 percent of buyers at the end of July 2019 which is up from 32 percent in 2015. This year is proving no different and the demand has been fuel for the current booming housing market.
Millennials are one of the main reasons sales grew in July to some of the strongest numbers experts have seen. According to the NAR, Sales of previously owned homes jumped 25 percent from June to a seasonally adjusted annual rate of 5.86 million, which is the highest rate since 2006. First-time buyers made up 34 percent of sales in July alone, many of which were millennials. That’s up from 32 percent at the same time in 2019. Much of these numbers are attributed to the ever-persistent lack of supply. The competition is so high that 68 percent of homes sold in July was only on the market for a month or less.
At first, there was concern in the overall housing market regarding millennials and their buying behavior. Fears that they desire to rent long-term in trendy popular areas versus moving to the suburbs like previous generations. However, studies have shown that this age group does want similar things to the boomers and are moving outside of major cities to buy their first home and start a family. Much delay came from trailing student loans, debt, and late starts to careers. Now, these young adults are earning more than previous generations at the same age.
With young adults working from home and spending more time in their space because of the pandemic, it has been proven that the mindset of how this generation views a home has changed. A study done by YPulse found that almost 70 percent of 19 to 37 year-olds would rather stay in than go out on the weekends. This plays a huge role in how real estate experts can observe young consumers entering the market.
YPulse also discovered some additional data in the shifts that the pandemic has had on Millennials and GenZ and real estate:
- 3 million Millennials have moved back with their parents during the pandemic
- Before the pandemic, 34% of Millennials and 8% of Gen-Z consumers owned their own homes
- 48% of those ages 19-37 who rent or live with parents are putting off homeownership because of Covid
- 85% of young people reporting that they plan to eventually buy a house.
The biggest milestone is that more than half of home purchasing mortgages are due to millennials. At 53.1 percent, they have held this milestone since last year, and homeownership for younger adults is expected to keep growing over the next few years. In July, that number grew to 61 percent, which was a 5 percent rise from the previous month, according to an Ellie Mae study. This increase is the largest purchase share for Millennials since before the pandemic in March.
The low-interest rates during the pandemic have driven buyers nationally. Rates have lingered under the three percent level, with the most common 30-year fixed-rate going as low as 2.875 percent. For young buyers, the appeal of saving money on payments, and an increase in their purchasing power – amidst the unaffordable housing era, is a huge incentive for buying a first home.
Despite the tight housing supply, more millennials and young couples are making the move to start a family or have more space. Who exactly was taking out these loans?
- 21-29 year-olds (Younger Millennials): 81% of loans for purchases
- 19% were for refinances.
- 30-40 age group (Older Millennials): 53% of loans for purchases
- 46% account for refinances.
Homebuilders are determined to continue activity to match the demand, but their pacing may not be fast enough. If high unemployment numbers continue to rise, it may create a lag in buying activity. Nonetheless, there is still a wide margin of millennials who have yet to enter the market and the demand continues to grow. The industry may see a slowdown in purchase activity, but the motivation to buy is still on these young adult’s minds.
It is important to be educated on which loan is right for you. If you or someone you know is looking to buy their first home, please share our information, and let’s take the necessary steps to make you a homeowner.
This article is intended to be accurate, but the information is not guaranteed. Please reach out to us directly if you have any specific real estate or mortgage questions or would like help from a local professional. The article was written by Sparkling Marketing, Inc. with information from resources like Realtor.com, Forbes, NAR, Ellie Mae Millennial Tracker.