According to the National Association of Realtors, the median age of first-time homebuyers is 35 years old, which means that the millennial generation—generally regarded as individuals born between 1981 and 1996—has reached the stage in their lives where buying a home is often a top priority. Yet recently, the cost of homeownership has skyrocketed in large part due to an adverse combination of high interest rates and scarce inventory, leaving millennials with a daunting homeownership outlook.
U.S. Mortgage Originations Over Time
U.S. mortgage originations have dropped to multi-decade lows following the COVID-19 surge
Source: Construction Coverage analysis of Federal Reserve Bank of New York data | Image Credit: Construction Coverage
This difficult homebuying landscape has resulted in a dramatic shift in mortgage originations. Prior to the COVID-19 pandemic, U.S. mortgage originations were already on the rise—climbing from $422 billion in Q1 2019 (after adjusting for inflation) to a 14-year high of nearly $907 billion in Q4 2019. After a brief dip due to pandemic-era stay-at-home orders and social distancing, originated mortgage volume skyrocketed to a new high of over $1.4 trillion in Q2 2021. This abrupt growth is mostly attributed to historically low interest rates, low inventory, and an increased desire for more space amid the pandemic.
However, these conditions were short-lived. Elevated interest rates combined with other forces, such as return-to-office mandates, brought inflation-adjusted mortgage originations down to just $334 billion in Q1 2023, the lowest levels in over two decades. As of Q1 2024, originations remain near historical lows at $403 billion.
Residential Mortgage Characteristics by Applicant Age
Millennials are buying homes with larger loan-to-value ratios than older generations
Source: Construction Coverage analysis of Home Mortgage Disclosure Act data | Image Credit: Construction Coverage
In order to cope with rising prices, millennials are taking out larger home loans. In 2022, the median loan amount for mortgages taken out by applicants age 25–34 was $315,000, and $365,000 for applicants age 35–44, higher than any other age group. Similarly, the loan-to-value ratio—or the amount of the mortgage compared to the sale price of the home—was 87% for 25- to 34-year-olds and 80% for 35- to 44-year-olds. Inherently, many millennials are first-time homebuyers and typically have less existing home equity to apply to new mortgages. Additionally, millennials are at the stage of their lives where they may be supporting a growing family and require more living space compared to older generations.
Geographical Differences in Millennial Home Purchase Loans
Massachusetts millennials accounted for 64.2% of home purchases in 2023
Source: Construction Coverage analysis of Home Mortgage Disclosure Act data | Image Credit: Construction Coverage
Despite the overall decline in home buying across the country, millennials still account for the majority of home purchase loans in 2023. However, millennial home purchasing varies by location. Millennials in northeastern states account for the largest share of home purchase loans, with Massachusetts (64.2%), New York (63.8%), and New Jersey (63.3%) leading the country. Midwestern states such as Illinois (62.5%), Minnesota (62.2%), and Nebraska (61.4%) also rank among the top 10 states for millennial home buying. On the other end of the spectrum, Delaware (40.6%), Florida (44.6%), and South Carolina (45.7%) have the lowest share of home purchase loans taken out by millennials and have notably older populations.
Below is a breakdown of where millennials are buying homes for the top and bottom metropolitan statistical areas and states. The analysis was conducted by researchers at Construction Coverage, a website that compares construction software and insurance, using data from the Federal Financial Institutions Examination Council’s Home Mortgage Disclosure Act dataset. For more information and complete results, see the original post Where Are Millennials Buying Homes in the U.S.? on Construction Coverage.
Large Metros Where Millennials Are Buying Homes
States Where Millennials Are Buying Homes
Methodology
Photo Credit: karamysh / Shutterstock
The data used in this analysis is from the Federal Financial Institutions Examination Council’s 2023 Home Mortgage Disclosure Act. To determine the locations where millennials are buying homes, researchers at Construction Coverage calculated the millennial share of conventional home purchase loans originated in 2023. In the event of a tie, the location with the greater total number of millennial home purchase loans was ranked higher. Due to limitations in the dataset, the millennial generation was approximated as being age 25–44 in the year 2023—the combination of the 25–34 and 35–44 age cohorts. In a prior version of this analysis, the millennial generation was approximated using only the 25–34 age cohort in 2020 since this best represented the generation at the time.
To improve relevance, only metropolitan areas with at least 100,000 residents were included. Additionally, metros were grouped into cohorts based on population size: small (less than 350,000), midsize (350,000–999,999), and large (1,000,000 or more).
For complete results, see Where Are Millennials Buying Homes in the U.S.? on Construction Coverage.
