Millennial home buyers now have major advantage in the housing market

Younger buyers may find the housing market more accessible this year.

Feb 23, 2025 - 16:14

Millennial home buyers now have major advantage in the housing market

The housing market has posed significant challenges for first-time home buyers, who are now primarily millennial and Gen Z consumers.

The highest mortgage rates in two decades, rising home prices, and a lack of housing supply have made it difficult for younger buyers to enter the market.

As a result, many millennial buyers postponed buying a home and continued renting while waiting for the housing market to improve.

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Though mortgage rates are still relatively high and home prices continue to rise, millennials have come around to homeownership, overtaking other generations as the primary home-buying demographic.

Mortgage rates are expected to continue dropping— albeit modestly and slowly — and new home construction will likely bolster the housing supply throughout the year.

Demand among younger buyers is expected to increase as these conditions improve, spurring long-anticipated housing market growth.

A family is shown looking at their new home. Though mortgage rates have been elevated since 2022, millennial homebuyers have returned to the housing market.
Shutterstock.

Millennial homeowners now comprise 20% of the market

Millennials have faced several economic crises in their young adulthood, making reaching financial milestones difficult. While the 2008 financial crisis impacted the job security and wage growth of older millennials, the COVID-19 era mass layoffs and surging inflation in 2022 hit younger generations at a pivotal time in their careers.

However, millennials account for almost half (47%) of outstanding student loan debt, significantly increasing financial strain on the entire generation.

Inflation, job instability, mounting student loans, and the rising cost of housing made it difficult for millennials to save for a down payment. Compounding financial hardships on younger consumers pushed the average home buyer age up to 56 and 38 for first-time home buyers in 2024.

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However, millennials accounted for 38% of homebuyers last year, far exceeding Gen X (24%) and Baby Boomers (31%).

According to Redfin analysis, millennials now own more than 20% of the housing market, with a combined generational home value of $9.7 trillion. This represents 19% growth year-over-year, indicating that homeownership may have become more accessible for younger buyers.

Although Baby Boomers still own over 40% of the housing market, millennials are beginning to make up for lost time and pursue homeownership.

Increased negotiating power is turning home buying in millennials’ favor

Part of the increase in housing market sentiment and buying activity among younger consumers can be attributed to the initial shock of rising mortgage rates wearing off. Buyers have somewhat accepted that elevated mortgage rates may be here to stay for a while and are deciding to buy a home with the option to refinance later.

Many millennials and Gen Z buyers note they are comfortable with mortgage rates at or below 6%, which isn’t far off from the current 6.85% average 30-year fixed mortgage rate.

Buyers are now enjoying significantly higher negotiating power, giving leverage to younger buyers hoping to get a competitive price.

Homes now sell for 2% less than their asking price, the highest discount rate in two years. Houses are also staying on the market to go under contract — the longest stretch in over five years.

Inventory levels are rising – up 4.2% from last year — reducing competition and slowly shifting buying power back to first-time home buyers. If mortgage rates continue inching back toward 6% and housing supply rises steadily, experts anticipate more millennial buyers flocking to the housing market.