Home Buying Today, for Millennials

Millennials now range in age from their late 20s to early 40s. Most of the ones who can buy homes are getting to the older edge of that range.

They need more money than buyers of the past. Maybe that’s why they’re waiting until later in life to buy. In short, this generation’s home buying challenges really are unique.

Who’s Keeping Track?

the National Association of Realtors (NAR) has published its annual buyer and seller stats. And the typical first-time buyer is now a 35-year-old millennial.

Boomers recall the days, back in the early 1980s, when mortgage interest was priced at 18%. But homes weren’t as pricey back then, and buyers were able to refinance later, after the steady slide downward for rates.

One of the most startling stats today involves the first-time buyer’s income. The typical buyer earns $96K. And to get even a very modest home in most markets today, the first-time buyer needs to earn about $64K. That’s up about 13% from a year ago. Talk about inflation!

NAR has found:

About half of first-time buyers aren’t married.

Most first-time buyers don’t have kids.

About a fourth of them used borrowed or gifted cash for the down payment.

Evidently, millennials don’t like being sidelined. They’re struggling hard to get homes, even though mortgage rates and home prices both off-putting.

First-Time Buyers in Their 30s and 40s Are the New Normal.

It’s not you. Real estate has become terribly hard to buy. It’s becoming ever harder to find homes priced under $300K. Inflation in the sector has outpaced people’s incomes. The days when people in their twenties were expecting to buy homes are now a memory from our parents’ generation.

Today, twenty-somethings are just doing their best to save. Not easy for those with student loans and rising rents. Millennials have relatively higher levels of personal and student-loan debt. It might be different if there were well-situated niches to look for affordable homes. But cheap “starter homes” don’t seem to be a thing any more.

Rates have headed upward — close to 8%. High interest rates mean heavy monthly payment burdens, and much more debt over the course of a mortgage.

In turn, hopeful buyers face higher hurdles to qualify for loans and succeed in the market.

Young Buyers Unready to Buy in 2020-2021 Missed Out.

Nobody likes high mortgage rates. But who’s bearing most of the pain? Millennials. Remember that many of them (especially younger millennials) weren’t ready to win loan approvals during the time of super-low interest rates following the Covid-19 lockdown period.

If they were still saving up at that time, they missed out on more than the mortgages. They missed the available listings themselves.

And now, where are all the listings? Homeowners are holding fast to their deeds. Why sell now, they might ask? Redfin says four out of every five homeowners are paying interest rates under 5%. Who wants to buy something else when interest rates are substantially higher?

So, that’s why homeowners are staying put after financing real estate in the 2020-2021 rush.

And that’s also why people who hadn’t yet bought a home in low-interest times are in a jam now, even if they’ve managed to keep saving. The bar got higher. Monthly mortgage statements now add up to several hundred dollars more than they did just two or three years back.

When All Else Fails…Some Young Adults Go for Potential Crypto Gains.

Some young adults have taken the plunge into bitcoin and other cryptocurrencies, hoping to make the best of the latest surge in digital asset values. And that’s another unique, generational difference. Boomers — at least those in the early part of the generation — weren’t investing in crypto to buy their homes.

But people under 40 make up nearly 94% of cryptocurrency buyers. A striking statistic? Yes, but young adults’ appetite for risk makes sense when going to school and following all the right financial advice isn’t enough.

People with high debt and FICO scores at the lower end of the scale are especially interested in buying cryptocurrency. They might think taking high-risk choices (investing in bitcoin, options trading, and so forth) is one possible way to build their lives.

Their situation doesn’t quite seem fair. And maybe that’s why Sam Altman (founder of the famous ChatGPT company Open AI; now working for Microsoft) insisted digital currency ought to be adopted as a form of universal basic income — a.k.a. free cash handouts. Digital assets could lift everyone up at once, without leaving people to struggle. At least that’s the idea behind Altman’s company Tools for Humanity.

What Should Millennials Do Now, If Buying Is Still Not Feasible?

Each person is in a specific position and has unique future plans and dreams. So, the answers will vary. But for those feeling ready to throw in the towel, here are some points to ponder.

First, the bad news. Goldman Sachs researchers think mortgage interest will be high in 2024, too. A lot of people who are holding onto deeds won’t be giving them up for a while.

But hopeful buyers can take heart, as markets are local. When the overall situation looks bleak, caring, local professionals can be extremely helpful. Search, too, for companies offering special low mortgage rates at this time.

It’s always worth remembering that ownership puts inflation on the buyer’s side. Inflation sends real estate (and rent) prices higher, but a fixed-rate mortgage doesn’t go up. Taxes and homeowners’ insurance might rise, but renters wind up covering that too. It’s a buyer who gets an asset that appreciates in value. And the earlier in life a purchase is made, the earlier the mortgage will likely be paid off.

Today, a home continues to be the key asset for most people. In every generation, owning a home is one thing people will struggle for.

Supporting References

Sydney Lake for Fortune Magazine (part of Fortune Media IP Limited), republished by Yahoo Finance: This Isn’t Your Parents’ First-Time Homebuyer: More Millennials Are Breaking Into the Housing Market, But They’re Older Than Boomers Were and Need to Earn a Lot More Money (Nov. 14, 2023; citing data from the National Association of REALTORS® and the Berkeley Economic Review).

Alena Botros for Fortune, via Yahoo Finance: Boomers Won the Housing Market and Millennials Got Screwed, Bank of America Says. “Everyone Locked in 3% Mortgage Rates, Except Millennials” (Oct. 26, 2023). Also see Bethan Moorcraft for Moneywise, via Yahoo Finance: “Everyone Locked in 3% Mortgages Except Millennials”: Bank of America Data Shows This Generation Is Feeling the Worst of Elevated Interest Rates (Nov. 19, 2023).

Frank Gogol for the Stilt.com Blog: Study: 94% of Crypto Buyers Are Gen Z/Millennial, But Gen X Is Outspending Them (updated on June 19, 2023; based on data collected from Stilt applicants in 2020 and 2021 and prepared by Rohit Mittal, using sources described in the article).

Deeds.com: “Mortgage Companies Are Desperate”: What’s Next for Homes and Mortgages in 2024? (Oct. 30, 2024).

Deeds.com: Holding Low-Interest Loans, Many Homeowners Are Too Comfortable to Move (May 31, 2023).

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