How Millennials Are Impacting the Housing Market

Young Adults May Provide Housing Prices With a Boost

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It seems that every generation has its own opinions about the ones that precede and succeed it. Millennials, those born between 1981 and 1996—according to Pew Research—have earned a substantial amount of commentary and criticism, particularly with regard to their financial habits and attitudes toward money. One of the latest critiques of the millennial generation is that they're responsible for a slowdown in the growth of home values.

According to a recent Zillow analysis, using data from the U.S. Census' American Community Survey, 21.9% of millennials live at home with their parents vs. buying homes of their own. While that type of living situation may not be ideal for every millennial, for many it's become a necessary choice for coping with stagnating wages and crippling student loan debt.

There is some good news, however. Millennials may soon be pushing housing forward as more first-time buyers enter the market.

Influencers on Home Values and Market Trends

The housing market is heavily driven by household formation. The more households we create, the more upward pressure is exerted on housing prices. When millennials begin moving out of their parents' homes and into the home-buying landscape, it's generally a good thing for home prices and home values.

Through the first half of 2019, the housing market was largely in favor of sellers, with home prices rising. Among the primary factors influencing the market are:

  • Consumer Confidence: Consumers feel confident in their buying power and the economy overall.
  • Housing Prices: Specifically, how home values and home prices move in tandem with one another.
  • Interest Rates: Interest rate policy has been closely watched as consumers and economists attempt to decide how the Federal Reserve will adjust rates.

If millennials can get out from under their student loan debt and see an economy conducive to steady, livable incomes, the housing industry could tap into their home-buying potential, bolstering the market.

Millennials Were Slow to Leave the Nest

One explanation for this phenomenon was purely economic—jobs, or the lack thereof. The Great Recession stagnated job growth for non-college educated young adults. Young adults have always struggled to find career paths—millennials are no different in that respect—and those that do find careers may continue to struggle to earn a livable wage.

This generation is warming up, however. A study from the Bureau of Labor Statistics in 2017 concluded that millennials are now employed in greater numbers than non-millennial generations. In 2017, 79% of this generation were employed, compared to 59% of non-millennials.

The health of the economy plays an important factor in home-purchasing by different generations. The experiences each have has taught them something different.

Millennials want to buy a home of their own, similar to other generations if they can find one they can afford which suits their lifestyle. In fact, Generation Y accounted for the largest age group of homebuyers in 2019—according to a Realtor.com study, 37% of homebuyers in 2019 were millennials between the ages of 21 and 38.

This may have something to do with the aging of Generation X, who are maturing in their careers and lives, settled into, upgrading, or selling their homes—25% of home-sellers were from Generation X in 2019.

However, those millennials that have yet to buy may be challenged to find affordable properties as home prices in many markets across the U.S. continue their rising price trend.

What's Next for the Market?

If there is another housing boom, it will have to be powered by this large generation. The economy will need to cooperate, and they will require incomes that support their move into dwellings they own.

Smaller cities may begin to outpace larger ones for growth in home sales. Bidding wars may ease as home inventory increases, and mortgage rates may remain low or drop further if the Fed initiates further decreases in the federal funds rate. It is tough to predict the market for 2020 and beyond, with fluctuating investor confidence, a slowing economy, and a continuing array of different crises occurring around the country and globe.

Article Sources

  1. Zillow Research. "14 Million Millennials Still Live With Mom." Accessed Mar. 21, 2020.

  2. Bureau of Labor Statistics, Monthly Labor Review. "Time Use of Millennials and Non-Millennials." Accessed Mar. 22, 2020.

  3. Realtor.com. "2019 Home Buyers and Sellers Generational Trend Report." Accessed Mar. 22, 2020.

  4. Federal Reserve Bank of St. Louis. "Median Sales Price of Houses Sold for the United States." Accessed Mar. 22, 2020.