Millennials are struggling to buy a house in America. Homeownership is a significant goal for young adults. 60% of Gen Z and 58% of Millennial survey respondents believe that owning a home is more important now than during their parent’s generation, compared to only 26% of Baby Boomers. However, despite their aspirations, Millennials (aged 28-45) are struggling to buy a house, especially older Millennials (aged 35 to 45 years old). Here are some reasons why (according to the latest Bank of America research study):
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Millenials have less wealth. Baby Boomer and Gen X households have significantly higher net worth compared to Millennials. In fact, the average Baby Boomer household had a net worth of $1.8 million, while Gen X households had around $1.2 million in the second quarter of 2023.
These amounts are significantly higher than the median existing home sales price of approximately $400,000 during the same period.
On the other hand, the average Millennial household has a net worth of only around $200,000, which is much lower than the median home sales price. In fact, it’s just one-ninth of the net worth of the average Baby Boomer household.
Need for Financing
Millennials have less wealth compared to older generations, which means they need financing when buying a home. This makes them more vulnerable to rising borrowing costs.
Less Escrow Payments
Millenials don’t have enough for escrow payment. In October 2023, the number of older Millennial households with an escrow payment was down 2% YoY.
Interestingly, younger Millennials (aged 28-35) are experiencing stronger growth in escrow payments compared to their older Millennial counterparts (aged 35-45). This could be due to a low base, as younger Millennials are just entering the home-buying age, while older Millennials began this process a few years ago.
Heavy Debt Burden
Millennials are grappling with a heavier debt burden. For example, nearly 40% of the outstanding student loan balance in the US during the third quarter of 2023 was held by those aged 35-49, which aligns with the age group of older Millennials.
Additionally, credit card delinquencies have risen significantly for individuals aged 30-39, surpassing 2019 levels.
Older Millennial households have higher expenses, including childcare costs, which affects their overall financial health.
The older Millennial cohort is more likely to have been hit harder by the 2008 housing crisis, which potentially impacted their ability to save for a down payment or qualify for a mortgage.
What’s Important for Millennials When it Comes to Buying a House:
Given the relatively tough housing market for Millennial households, many find themselves making sacrifices to enhance their chances of buying a home. Here are some of the things that are important to them:
37% of surveyed Millennials expressed a willingness to forgo luxury amenities in exchange for a better chance at homeownership. They see this as a strategic decision in their quest to have a place they can truly call their own.
Brand New Homes
35% of Millennial respondents indicated that they would forgo owning a brand new home. In order to increase their chances of buying a home, Millenials are willing to buy a home that is not brand new.
Proximity to Family
32% of Millennials are willing to give up being near family to increase their chance of buying a home. Living near family is still an important factor for millenials but some are willing to move further from family for a chance of homeownership.
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Free Home Buying Printables: