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Exploring the shifting housing situation surrounding millennials

July 31, 2019

The narrative around homeownership and millennials is well known. Millennials are forming households comparatively later than other generations and many are choosing to rent instead of buy. There are a variety of factors behind these dynamics, but the trend is starting to shift as millennials are aging and becoming a more dominant group in the home-buying market.

Millennials shifting toward homeownership
According to a Forbes report, many of the conditions surrounding millennials and their home-purchasing decisions are starting to normalize. In 2009, the growth in the number of new households being formed had slowed to the point that only 534,000 households were created that year. Now, that rate has climbed and experts expect between 1.2 and 1.5 million households to form this year. This represents a return to normalcy, and Forbes pointed to research from the Harvard Joint Center for Housing to highlight that this rate represents what experts would expect relative to population growth.

"Millennials are starting to see some income growth recovery."

Millennials aren't just forming households at a rate that aligns with expectations. They are also starting to see some income growth recovery. Forbes explained that these conditions are leading to a new wave of millennial homeownership as life changes and income improvements are leading members of the generation to work toward purchasing homes. However, the study from the Harvard Joint Center for Housing Studies that Forbes used as the basis for its report also highlighted many of the challenges facing millennials seeking homes. These include:

  • High housing costs for renters.
  • Substantial variance in homeownership affordability across different regions.
  • Rising land prices in many parts of the country.

While these barriers are holding millennials back from homeownership, they aren't the deal breakers they have been in years past. As market conditions improve for millennials, more households are starting to look for homes. What's more, the size of the demographic makes them powerful influencers in the housing market, something that is evident in a study. delved into mortgage originations across different parts of the country, identifying the share of mortgages going to members of different generations. Millennials have begun to dominate the market, seeking mortgages at a rapid pace. Here's a look at a few regions the study highlighted and the percentage of mortgage originations that stemmed from millennials in those areas:

  • Providence and Warwick, Rhode Island, 55%.
  • Columbus, Ohio, nearly 50%.
  • Boston, Cambridge and Newton, Massachusetts, just over 50%.
  • Austin and Round Rock, Texas, 48%.
  • Grand Rapids and Wyoming, Michigan, 60%.
  • Los Angeles, Long Beach and Anaheim, California, 31%
  • Phoenix, Mesa and Scottsdale, Arizona, 37%.

As millennials start to shift toward homeownership, the market is beginning to respond. This shift could be key as current mortgage rates are putting power into the hands of buyers.

The transition to a buyer-friendly market

"A buyer seeking to spend $1,500 per month on mortgage payments can afford a $402,500 home."

As more millennials seek to move into homeownership, many are finding they have more buying power than normal due to low mortgage rates. In a Forbes report, Danielle Hale, Chief Economist for, explains just how much buyers can save due to low rates. A buyer seeking to spend $1,500 per month on mortgage payments can afford a $402,500 home due to low average mortgage rates. That same buyer would have only been able to afford $367,500 last year.

While low mortgage rates are creating opportunity for millennials to enter the housing market, there are still barriers facing households seeking to purchase their own home.

Barriers facing millennials seeking a home
As many millennials are beginning to form households and seek mortgages, plenty of them are first-time homebuyers. found that approximately 42% of all home shoppers were first-time buyers this year, and many first-time homebuyers are millennials. Approximately 36% of first-time home shoppers in the study were aged between 25 and 34 years, which is often the sweet spot for millennials. But those in the 35-44 age bracket, which would also include some individuals who identify as millennials, made up 23 percent of all first-time home shoppers. As such, many of the trends pertaining to first-time homebuyers also apply to millennials.

According to the study, the top barrier facing first-time homebuyers is their budget. Approximately 42% of those analyzed by the study said they can't find a good house that fits their budget. Another 41% said they haven't been able to find a house that meets their needs. On top of all this, 29% said they don't have the funds needed for a down payment.

Financial barriers are still clearly a barrier for millennials, but the generation is beginning to have a significant influence on the housing market as so many first-time homebuyers are millennials.

How homeownership is changing in response to millennials

"Many millennials are skipping starter homes altogether."

A Business Insider report took a big-picture look at the way millennial behavior is changing the housing market. The article highlighted a few well-established trends, including that, compared to other generations, millennials are renting for longer before transitioning to homeownership, living with roommates due to the high costs of rent or spending more time living with parents. But as more millennials begin to seek homes, a few trends are emerging about their preferences. The news source pointed to the following as some of the noteworthy developments:

  • Many millennials are skipping starter homes altogether. Instead, they are renting later in life and waiting to purchase a home until their households are more established. As such, when they enter the market they are frequently not seeking a typical starter home. However, demand for starter homes still remains high as real estate investors often covet such properties.
  • Millennials are embracing modernized design aesthetics and smaller homes that are efficient. In many cases, members of this generation are avoiding the large, often ornate homes that were popular among baby boomers and other generations.
  • Suburban and even exurbs - areas beyond the suburbs, but still not rural - are emerging as booming destinations for millennials as many go to these areas to find affordable housing.

In recent years, the housing market has been dealing with the ramifications of millennials often choosing not to form households and purchase homes. In today's climate, that is beginning to change. As millennials continue to age and some of the economic conditions behind slow household formation disappear, more people from this generation are turning to homeownership. There are still barriers facing many millennials, but as more households enter the market, the industry is responding to their changing preferences. While there still is plenty of uncertainty about what millennials will want from homes, a few trends are already becoming clear as members of the generation seek affordable, quality housing that can fit into their lifestyles without burdening them with the high costs of more traditional homes that are either too large or too ornate to fit their tastes.




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