In 2017, Australian millionaire Tim Gurner famously attempted to blame millennial homebuyer obstacles on their inability to avoid frivolous spending on $19 avocado toast, in comments that were widely mocked throughout the internet.
Many commentators are still quick to point the finger at extravagant spending to explain why homeownership among younger adults has declined compared to previous generations. However, the more likely culprit is soaring student loan debt and a limited supply of homes causing rapidly inflating prices, which is making it more difficult for millennials to afford homes.
Despite what you hear, it’s not all doom and gloom for aspiring millennial homebuyers. According to the National Association of Realtors (NAR) latest study, millennials continue to be the largest generational cohort of buyers, making up 36% of the purchase market.
Check out the latest statistics and trends among this influential bloc of homebuyers.
Stats About Millennials
Many people still think of millennials as teenagers, instead of young adults in their 20’s and 30’s who currently make up the largest generation in the workforce. NAR’s study defines millennials as buyers age 20-37.
Of this group:
- 22% of millennial buyers are age 20-27, while 78% are age 28-37. The median age was 31.
- 66% were married couples, 18% were single, and 15% were unmarried couples
- 65% were first time homebuyers
- Prior to buying, 56% rented an apartment or house, 18% lived with parents/relatives/or friends, and 24% owned a previous home
Millennials As Homeowners
- 89% purchased previously built homes and 11% purchased new homes. Better price was cited as the number one reason buyers purchased previously owned homes.
- Quality of the neighborhood, convenience to job, and overall affordability of homes were the top reasons millennial buyers chose their neighborhood.
- The median purchase price was $220,000
- 44% paid asking price or higher for their home
Millennials and Home Financing
- 98% of millennials financed their home purchase, compared to 88% overall
- 75% used savings for the down payment, 23% used gift funds, and 21% used proceeds from the sale of a primary residence (respondents could select more than one source)
- 53% reported that student loans delayed saving for a home
- 55% reported that they made sacrifices to non-essential items like entertainment and vacations to save for a home
- 67% found the mortgage application and approval process not difficult or easier than expected.
- Only 6% of millennial buyers had a previous mortgage application denied. The number one reason was for debt-to-income ratio, followed by low credit score.
- 46% of buyers had student loan debt. The median amount was $27,000.
- 55% used a conventional loan, 27% used an FHA loan, and 10% used a VA loan.
After analyzing their demographics and buying habits, it is clear that millennial buyers have become a powerful force in the housing market. As it turns out, avocado toast is not preventing millennials from buying homes.