Older Millennials Face Bigger Struggle in Housing Market

According to the latest America Homebuyer Insights Report from Bank of America, homeownership is more important for Millennials than it was for their parents at the same age. This group has made progress in homebuying during the past few years, as home affordability was improved by historically low mortgage rates in 2020. However, with mortgage rates still quite high, younger homebuyers are being hurt at an unbalanced rate. In fact, home purchasing slowed more for Millennials than for older generations.

According to the data, it is specifically the older Millennial households (aged 35 – 45) that appear to be facing the greatest financial challenge. This report analyzed escrow payments coming out of consumer accounts which is a strong gauge for homebuying activity. A few indicators were noted based on this analysis.

First, prior to the pandemic, the percentage year-over-year growth rate of escrow payments among both younger and older Millennials was consistently higher than Baby Boomers. This seems appropriate as Millennials were entering their prime home-buying ages in 2019.

In 2020 and 2021, this gap widened quickly as record low mortgage rates made purchasing a home more affordable. This resulted in an increase in homeownership, especially among younger generations.

Then we entered 2022, and home affordability began to plunge with the rapid increase in interest rates. During this time, the percentage year-over-year growth rate of escrow payments among Millennials coincided with that of Gen X and Baby Boomers. Older Millennials saw the biggest drop, with escrow payments down two percent year-over-year for older Millennials in 2023. This put them in line with Baby Boomers and lower than Gen X. At the same time, escrow payments remained relatively strong for younger Millennials.

It is not surprising that Millennials are facing difficulty in the current housing market. They typically have less wealth than older generations, which requires them to seek financing when purchasing a home. This exposes them to rising borrowing costs.

However, younger Millennials are experiencing stronger growth in escrow payments, which might come from a low base, since they are just entering home-buying age, while older Millennials started the process a few years ago.

Also, older Millennials seem to have a larger debt burden overall. This includes student loans and a higher rate of credit card delinquencies. Their household expenses, which may include childcare, might be higher, too. Finally, the older Millennials are more likely to have been hit by the 2008 housing crisis, whereas younger Millennials may not have suffered financially due to their ages at the time.

While Millennial are facing difficulty in this housing market, according to this data they appear willing to make sacrifices to purchase a home. This is a strong indication that the dream of homeownership is still alive and well for this generation.