How Exactly are Millennials Buying Homes?

If you believe the hype, millennials will never be able to buy homes. The boomers think it’s because they consume too much avocado toast and designer coffee, but millennials will point out that the reasons are less personal and more systemic.

The median price of a home in the U.S. in 1950 was $7,354. The average family income that year was $3,300. In 2022 the median price of a home varies hugely from state to state, but in California, for example, is $505,000. The median annual income of a household in the state is $80,440.

Whereas many boomers were able to buy a house that was worth a little over twice their annual income, millennials are looking at the average house being over six times their income.

This, of course, doesn’t tell the full story. The income of many workers is much lower, and high rents make it increasingly hard to save a down payment. A study in 2020 reported that there wasn’t a single US state left in which workers on an average hourly wage could afford rent on a one-bedroom apartment (when defining “affordable” as spending no more than 30% of monthly income on rent), and things aren’t getting any easier.

But somehow, millennials are making it work. In fact, they’re the fastest-growing market segment of homebuyers, according to a recent report from the National Association of Realtors. So how exactly are they managing it?

They’re Buying Later

They have to save the substantial down payment necessary, but also they’re marrying less and later and having kids later, so the rental/roommate model (as well as the living at home model) works better for longer. Pew research has found that just 46% of millennials are married, compared to the 83% marriage rate of the Silent Generation at the same age, the 67% marriage rate of early Boomers at their age, or the 57% of Gen Xers.

They’re Avoiding Rent

Many millennials will say that high rents are the main reason they’ll never be able to buy a home, and it’s true that the cost of rent has increased way too fast for wages to keep up, in most areas. So for many, the only way to save a down payment is to minimize or avoid that rent. Perhaps that’s why 52% of adults between18 and 29 are living with their parents. This percentage of adults living at home is pretty unusual in the US. It is perhaps significant that the last time it was recorded as (almost) this high was during the Great Depression.

They’re Splitting the Cost

The Wall Street Journal recently reported that many millennials are creating housing communes with friends, as it’s just not affordable to buy a home as a single person. To be fair, this makes perfect sense for many of those deciding to opt out of marriage and parenthood or delay it indefinitely.

Being single is expensive, in many ways, and splitting homeownership with another person can halve not only your down payment and mortgage, but many other living expenses too. It is, obviously, wise to have a basic legal agreement in place as to what happens when and if one of you wants to sell.

They’re Finding the Down Payment (Somehow)

Another thing older generations criticize millennials for is using the “Bank of Mom and Dad” to get hold of a down payment, but the reality is it’s simply not practical for many people on an average salary to save the ridiculous amounts necessary to get onto the housing ladder in some cities.

There are pros and cons to using a gift from parents or other family members as a down payment on a home, but it’s certainly increasingly common. And it’s not just the uber-wealthy who are helping out their kids. In fact, it’s becoming a way for middle-class families to “advance” an inheritance. Parents who have finally paid off their 30-year mortgage, and are happy to downsize from the family home after the family leaves the nest, are often using the proceeds to help their kids get onto the housing market. It really is the only way some of them will ever make it happen.

Millennials were never really kept out of the housing market by avocado toast and lattes. The picture was always bigger than that and the problems more systemic. But they are making it work. One way or another. Which means the retail housing market is still very much alive, for now.

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Karen Banes is a freelance writer specializing in entrepreneurship, parenting and lifestyle. She writes articles, website content, ebooks and the occasional award winning short story. Her work has appeared in a range of publications both online and off, including The Washington Post, Life Info Magazine, Transitions Abroad, Brave New Traveler, Natural Parenting Group, and Copia Magazine. Learn More About Karen