Millennial homebuyers: Obstacles to homeownership, statistics and tips

Hispanolistic/Getty Images: Illustration by Issiah Davis/Bankrate

Millennials are the largest generation in the U.S. This massive demographic was poised to reshape the housing market, but that hasn’t quite happened in the way we might’ve expected. While millennials value homeownership, high costs have hampered their ability to buy. Here are the latest statistics on this homebuying generation.

Millennials and homebuying statistics

How are millennials affecting the housing market?

Millennials value homeownership: 71 percent cite it as a component of the American Dream, according to Bankrate’s 2024 Home Affordability Report.

However, they’re also hindered by affordability challenges. Blame it on the triple whammy of pandemic-elevated home prices, tight inventory and higher mortgage rates.

When it comes to saving for a down payment and closing costs, millennials primarily point to two hurdles: their incomes aren’t high enough (55 percent) and the cost of living is too high (57 percent), according to Bankrate’s Down Payment Survey.

Millennials are also buying their first homes later than baby boomers did. There are a number of reasons behind that delay, including high student debt loads — cited by 14 percent of millennials in Bankrate’s Down Payment Survey — and career and wealth stagnation caused by the Great Recession.

In addition to being held back by financial considerations, many millennials are in a general pattern of reaching life milestones later. In 2020, the median age for a man’s first marriage was above 30 for the first time in history, according to Census estimates, while the median age of a first-time bride was above 28, also for the first time.

Subsequently, millennials are starting their families later, and waiting to buy homes. The typical first-time homebuyer was 35 years old in 2023, according to the National Association of Realtors (NAR) — just shy of the all-time high of 36 years old in 2022.

Even so, for the last eight years, millennials have represented the biggest share of buyers, mounting as high as 43 percent in 2022, according to NAR. (That declined to 38 percent in 2023.)

What are millennials looking for in a home?

Millennials buy larger homes compared to other generations. In 2023, the typical older millennial purchased a home sized 2,400 square feet, while the typical younger millennial purchased a home sized 2,100 square feet, according to NAR. Older generations tended to buy homes less than 2,000 square feet.

Still, with fewer homes on the market, millennials have had little choice but to dial back their expectations and make compromises. Bankrate editor Laurie Richards and her husband bought their first home in 2023.

“My husband and I had originally wanted a bigger home, but we made the hard decision to purchase a starter home in lieu of jumping straight to our forever home,” Richards says. “In the end, this freed up more funds in our budget to go toward any needed repairs or expenses that came with waiving the inspection.”

Tips for millennial homebuyers

• Make a budget and stick to it. Our home affordability calculator can help you narrow down your price range based on income, down payment and more.
• Explore down payment assistance. Depending on your income and location, you might be eligible for a down payment grant, second mortgage or other type of help.
• Shop more than one mortgage lender. It’s not just about interest rates, but the all-in cost for your loan, including lender fees. Compare at least three mortgage offers to see what different lenders charge and find the best deal.

FAQ

• What years are millennials?
  

  Millennials are those born from 1981 to 1996, according to the Pew Research Center. They’re preceded by Generation X and followed by Generation Z.

• When should I start the homebuying process?
  

  It all depends on your credit, savings and timeline. If you know you want to buy a home in the next year, for example, you should have your finances in shape relatively soon compared to someone who isn’t buying for several more years.

  If your credit needs work, take some time to improve it before applying for a mortgage. For a conventional loan, lenders look for a score of at least 620. (Note, if you’ve had a bankruptcy in the past, you’ll need to wait anywhere from one to four years to qualify for a loan.)

  You’ll also need time to save for a minimum down payment and closing costs (or line up a down payment gift, if someone plans to help you). Generally, those gifted funds need to be in your bank account at least two months’ prior to applying for a mortgage.

• What is the average age of a first-time homebuyer?
  

  The typical age of a first-time buyer is 35, according to the National Association of Realtors.