Although some unique, pandemic-related economic factors have contributed to the current state of the real estate market, some of the largest structural factors driving the current market are generational.
Baby boomers—those born between 1946 and 1964—are increasingly choosing to age in place as they reach retirement. Simultaneously, millennials, who were born between 1981 and 1996, are now America’s largest generational cohort and at a peak age for buying a first or second home. Together, these forces mean that more buyers are competing for fewer homes. And according to Freddie Mac, the supply of homes for sale was already at a record low prior to the pandemic.
Despite the residential real estate market showing signs of cooling off after a historic runup during the COVID-19 pandemic, finding a home remains challenging for many buyers. Intense competition and rising prices have made it especially difficult for young, first-time homebuyers to make a purchase.
The real estate cool-off is also evidenced by changing home purchase loan volume. The total number of conventional home loans originated in 2022 was down across all age groups from the year prior. Among all age cohorts, 65–74 year-olds experienced the largest percentage decline, decreasing by 22.3%. However, younger homebuyers saw smaller decreases in home purchase volume. Notably, the under-25 age group only experienced a 12.3% decline, the smallest of all cohorts and a sign of persistent housing demand from younger generations despite economic headwinds.
Even prior to 2022, homeownership interest has been increasing among young buyers in recent years. The homeownership rate for adults under 25 reached 25.7% in 2020, matching a previous peak from the height of the housing bubble in 2005. Although that figure dipped slightly in 2021, the under-25 homeownership rate sat at 25.4% in 2022, well above rates seen in the 1980s and 1990s.
For young adults…
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