Millennials today have a greater influence on the housing market than any other generational demographic, according to the Deputy Chief Economist at First American, Odeta Kushi.
Kushi bases her assertion on First American's Homeownership Progress Index (HPRI), an annual report that measures how a variety of lifestyle, societal, and economic factors influence homeownership rates over time at national, state, and market levels.
While 24-40-year-olds are driving potential homeownership demand, primarily due to age and overall population of this generation, are driving homeownership demand, they collectively are comparatively delaying major lifestyle choices including homeownership, the economist says.
"Millennials are the largest generation in U.S. history, and the majority turned 30 in 2020. Historically, millennials have delayed the critical lifestyle choices often linked to buying a first home, including getting married and having children, in order to further their education," Kushi said. "This is clear in cross-generational comparisons of homeownership rates which show millennials lagging their generational predecessors."
For example: At age 30, 42% of millennials own homes, compared with 48% of Gen Xers and 51% of Baby Boomers at the same age.
Still, Kushi added, "millennials are narrowing this gap as they move into a new phase of their lives."
She goes into more detail about generational comparisons revealed in the index.
"In 2020, potential homeownership demand improved by 3.5 percentage points for millennials, the largest increase among the major generational cohorts. Generation Z followed with a 2.5 percentage point increase in the HPRI, Generation X increased by 2.1 percentage points and Baby Boomers increased by 1.3 percentage points," she said. "While millennial homeownership has been delayed relative to their generational predecessors, millennials now have the greatest influence on the housing market and remain poised to fuel a roaring 20s of homeownership demand."
Millennials appear to be pressing on, despite a temporary slowdown caused by the coronavirus pandemic and its impact on homebuyers.
“Despite the pandemic-driven economic downturn in 2020, millennials continued to age into the key lifestyle decisions that increase the likelihood of homeownership. In 2021, while faster nominal house price appreciation may begin to erode the affordability boost from low mortgage rates and rising income, these lifestyle decisions will persist," Kushi said.
2020's homeownership progress index's other key findings included:
- Nationally, potential homeownership demand represented by the HPRI increased 1.6 percentage points in 2020 compared with 2019, based on changes in the underlying lifestyle, societal and economic data.
- Some factors that increased potential homeownership demand included house-buying power growth (+2.1%), an aging population (+0.4%), rising educational attainment (+.2%), the higher share of married households (+0.02%), and the increase in the number of children per household (+0.009%).
- The increase in the U-6 unemployment rate decreased potential homeownership demand (-0.3).
- Potential homeownership demand increased from 2019 to 2020 in 41 of the 50 metropolitan areas tracked by First American, as demographic and economic trends in these cities raised the likelihood of homeownership.
As for those regional findings, First American reports that Alabama, Rhode Island, Idaho, Texas, and Connecticut showed the greatest year-over-year increase in potential homeownership demand, while the only states showing an annual decrease were South Carolina, Iowa, and Tennessee.
The full report is presented as an interactive tool that can be tailored to showcase how trends in economic conditions, education, income, marital status, ethnicity, and family size impact potential homeownership demand over time across the United States at national, state, and metropolitan-area levels.