Young Homebuyer Share Declines After Peaking in 2020

There is a notable difference between young homebuyers aged 30 and below, and older millennial homebuyers in the age range of 31 to 40. 

Generally, older millennials have advanced further in their careers, have a more stable income and are already homeowners who are considering a move-up purchase. In contrast, younger people have more financial challenges when competing to buy homes since they are just beginning their careers, have less or no credit history, limited or no savings and generally lower levels of income, according to a CoreLogic blog by its principal, economist Archana Pradhan.

The slim supply of homes for sale is pushing up home prices. Since 2021, record-breaking home price growth has created affordability challenges, especially for young homebuyers. 

The share of younger homebuyers peaked at almost 22% in 2020 as record-low mortgage rates improved buyer affordability and the pandemic—which exposed older populations to greater health risks—discouraged more mature people from buying, Pradhan wrote. 

However, by 2021, the share of young buyers dropped back to pre-pandemic levels before further declining in early 2022.

Housing Meltdown Flashbacks: 2006-09

“This current age group was in their early teens when the financial crisis and mortgage meltdown of 2006-09 hit and this was the first time in a while that we saw a major decline across the board in housing and the idea of owning a home to achieve financial security took a hit,” Jim McQuaig, senior VP at Churchill Mortgage, tells GlobeSt.com. 

They may have some lingering psychological impacts about buying a home because of that.

“Our economy is different today and we have many individuals self-employed, whether they’re working as independent contractors or starting their own businesses. This could delay the home-buying process a bit,” McQuaig says. 

“Additionally, we’re seeing greater movement between jobs which can hinder the ability to qualify for a mortgage. The younger generation also has less of an inclination to put down roots and there’s been a gradual delay in marriage and building a family more so than in the past, which typically drives homeownership.”

Another factor to consider, Rick Mount, managing partner of California/Nevada Business at Churchill Mortgage, is that the decline could be lifestyle-related.

“Many younger people are into ‘experiences’ and don’t seem to want or need the anchor of homeownership. With the effects of the pandemic resulting in more acceptance of remote working capabilities, this could impact a more nomadic lifestyle,” he said.

“In the long run, I think stability and homeownership will win out. Especially, when the market returns to a more level buyer/seller market and it doesn’t appear to be as much of an uphill battle as it is currently.”

But when will that day come. Although there are hints of the housing market heading for more balance, younger home buyers are still hostage to macro trends that were in place starting in 2008, when the housing supply tightened for all buyers, Jim Mullin, CEO of American Resort Communities, tells GlobeSt.com.  

“Additionally, younger buyers have gone urban and now that trend is reversing, bringing more interest to suburban housing solutions,” Mullin said. “Rising interest rates will bring more product availability for many buyers at large but will not provide enough relief to most younger buyers as the entry levels have percolated out of reach.”

January and February 2022 at 10-year Low

Since 2022 data includes January and February, CoreLogic looked at the same months for prior years to control for seasonality. The adjusted trend shows that January and February 2022 are at a 10-year low.

Younger adults make up a higher portion of the homebuyers in Midwest markets but a lower proportion in expensive coastal areas. There is a positive relationship between the share of young homebuyers and the affordability index, meaning there is a larger proportion of younger people purchasing in more affordable markets.

Younger applicants made up a higher share of the potential homebuyers in Midwest markets in 2021.

Provo, Utah, had the highest percentage (37%) of young adults applying for a home mortgage, followed by Ogden, Utah, with 35%; Grand Rapids, Mich., with 34%; Des Moines with 34%; Pittsburgh with 32% and Buffalo with 32%.

Omaha; Wichita; Colorado Springs and Cincinnati were among the top 10 metros with the highest percentage of younger homebuyers and these metros are also more affordable areas to buy a house.

Conversely, metros in Florida and California had the lowest percentage of young adults applying for a home mortgage. North Port, Fla., had the lowest percentage with 10%, followed by Cape Coral, Fla., with 11%; Deltona, Fla., with 13%; Oxnard, Calif., with 15% and Miami with 15%. Los Angeles; Bridgeport, Conn., and San Francisco were among the top 10 metros with the lowest percentage of young adult applicants.