Millennials Are the New Wave of Homebuyers
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One group is having a surprisingly large impact on the housing market, and contrary to popular opinion, it is not the boomers. Millennials accounted for the majority of all home purchases over the past year. In 2021, approximately 1 in 3 buyers (37%) was a millennial, defined as someone born between 1980 and 1995 and ranging in current age from 26 to 41 years old. Millennials make up a significant proportion of the total population in the country; around 1 out of every 4 Americans is a millennial. They account for 36% of the workforce. What’s more, millennials are just starting to approach their peak earning years, that time between the ages of 45 and 54 when incomes reach their zenith.
Will Millennials Fuel Housing Demand in the Years to Come?
The impact of millennials on the real estate market is expected to be felt for years to come. The median annual income for Americans aged 34 to 44 was around $74,300 in 2019; this salary gives millennials more than enough of the earning power needed for home ownership. This, coupled with shrinking debt and low interest rates, is pushing many millennials to start looking for homes of their own. When the Federal Reserve cut rates in 2020, pushing mortgage rates to record lows, home ownership for millennials under 44 years of age climbed to new highs.
Why Are Millennials Looking to Buy?
According to a 2021 study from the National Association of Realtors (NAR), 62% of millennials below the age of 30 stated that the main driver behind their desire to own a home was either to have a space of their own or to live in a larger property; when the study looked at 31- to 40-year-olds, that percentage dropped to 54. Two key factors underlie these results. First, millennials are starting to grow their families. During the pandemic, the number of households headed by 30- to 44-year-old adults climbed by 1.3 million. As the size of their families grows, millennials are outgrowing their current homes and are looking to purchase larger properties. A study published by NAR in 2021 found that 31- to 40-year-old married couples were more likely to purchase a new home than any other age group. Second, remote work—introduced during the pandemic—is a trend many millennials want to see continue. According to a 2021 study by YPulse, 55% of millennials want to work from home after the pandemic ends. Since a functioning work-from-home space needs to be private, many millennials are looking to buy larger properties with dedicated office spaces. And with the work-from-home trend expected to continue into the foreseeable future, millennials should continue driving home-sales in the years to come.