As they come of peak age for first-time homeownership, millennials are gaining an increasing share of today’s housing market.
Since 2016, millennials have comprised the largest share of home-purchase mortgage applications, rising even higher in 2020, when they made up more than half of overall applications, according to a recent CoreLogic report.
Today, as the millennial generation approaches the peak age of first-time homeownership, their home purchases are soaring. Millennials’ share of home purchases grew an average of 2% to 4% per year between 2014 and 2019, rising from 33% to 47%. In 2020, that share grew to 54%, thanks to both natural growth and the pandemic’s impact, which included record-low mortgage rates and the flexibility of working remotely.
CoreLogic found the share of millennial first-time homebuyer mortgage applications to be even higher, at 79% in 2020, up 5% from 2019.
However, Apartment List’s 2021 Millennial Homeowners Report showed that although millennial homeownership rates rose sharply over the past five years, they continued to lag previous generations. At age 30, 42% of millennials owned homes, compared to 48% of Gen Xers and 51% of Baby Boomers.
Homebuyer demand from millennials is likely to continue, as those under 30 have yet to become homeowners, while older millennials are at the stage of purchasing their next homes. CoreLogic found the share of millennial repeat buyer home-purchase applications was 35% in 2020, just 4% percent lower than Gen X.
Affordability is one of the biggest roadblocks facing millennials, especially following the pandemic, the Apartment List report found.
More than three-quarters of those surveyed said they were waiting until they have the financial means or are married or committed to homeownership with a life partner before buying a home. Forty-percent said the pandemic had a big effect on their plans, with 21% delaying a purchase due to partial or total income loss or a reduction of down-payment savings.
Record-low interest rates have made it easier to finance a home with a good down payment, but many millennial renters can’t afford that upfront cost. The majority of those surveyed by Apartment List don’t have a down payment saved, despite future homebuying plans. According to the report, only 15% saved more than $10,000, less than what’s needed to cover a 20% down payment on a median priced condo.
There is declining optimism over the prospect of homeownership among millennial renters. In 2020, 18.2% of them said they planned to rent forever, up from 12.3% in 2019 and 10.7% in 2018, according to the report.