Millennials are the most housing-obsessed generation, BofA survey shows—it’s a sign the prosperity of the boomers has bypassed them

William of England
By William of England 9 Min Read

Indeed, a new report by the Bank of America Institute means that homeownership is a high concern for youthful generations: Some 60% of Gen Z respondents, and almost 60% of millennials, mentioned they assume homeownership is extra necessary than it was throughout their dad and mom’ era. In a separate BofA survey, respondents cited proudly owning a residence as their primary sign of monetary success, and fifth on the checklist of success general, forward of choices like “building a family” and “career fulfillment.” 

Despite its significance, this marker of maturity is ever additional out of attain, particularly for older millennials (aged 35–45) who face a “bigger financial burden” with the largest share of excellent scholar loans and the quickest rise in bank card delinquencies, in line with BofA’s evaluation.

“While it’s tricky to draw a direct comparison between whether millennials or their parents face more barriers to homeownership given the numerous variables at play, it’s fair to say that millennials are faced with their own unique set of challenges,” Matt Vernon, BofA head of client lending, tells Fortune, noting that prime residence costs and rates of interest rank at the high of millennials’ checklist of challenges.

That very inaccessibility is probably going driving this era to acknowledge that purchasing a home is a important step for constructing wealth.

“While their parents and grandparents may have been able to do so in more favorable markets, millennials may perceive that building equity through the purchase of a home is especially important as inflation continues to keep living expenses high,” Vernon says.

Several different housing market consultants, economists, and millennial executives shared their very own theories about the youthful era’s actual property obsession. 

One main risk: The warmth is on from their friends, and social media is making it worse. 

“On average, especially in the tech space, millennials are making more than their parents did at their comparative age and are feeling the pressure of society to buy a house, or at minimum, a condo,” Elena Nunez Cooper, the 33-year-old CEO of Ascend PR, tells Fortune. “On social media, a plethora of ‘instant millionaires’ showing off their ‘perfect lives’ with big houses, supercars, and seemingly unlimited wealth pressures millennials to go big or go home.”

“Even if a millennial prefers to stay off social media, there is a constant flow of media that pushes the idea that owning a home as a thirtysomething is a must, and if you do not have a home, you must be failing at life,” Cooper provides.

Few methods for millennials to develop wealth

The want for chilly, onerous property probably additionally displays this era’s coming of age, beginning with the Global Financial Crisis, the sluggish restoration from it, then the COVID-19 pandemic and the highest inflation in 40 years. Even although millennials could also be making greater than their dad and mom at the identical age, they’re spending extra too. Cost of dwelling has solely elevated, scholar loans and different money owed maintain piling up, and inflation doesn’t appear to be letting up any time quickly. 

In 2020, the median millennial family made $71,566, in line with the U.S. Census Bureau. But that determine obscures the proven fact that at present’s households have more adults working than in earlier a long time. Despite the rise of the median, incomes have change into more unequal, that means that the lowest earners are struggling to maintain up. In the meantime, housing is taking on an ever-growing share of the funds. A current Guardian report discovered that, by the Nineties, a typical homebuyer may count on to pay thrice their annual revenue for a residence; by this 12 months, that determine had ballooned to 5.3. It’s no marvel that most Americans doubt at present’s youthful generations will do better than their parents economically.   

Indeed, some consultants counsel that millennials yearn for homeownership as a reprieve from runaway rental costs. Since the begin of the pandemic, rents are up by greater than 20% nationwide, including greater than $340 to month-to-month payments, in line with Rent.com’s November report.

“This situation puts pressure on millennials to buy homes early to avoid being priced out of the market,” says Michael Vestuto, a Las Vegas realtor with twenty years of expertise. “Early homeownership allows them to build equity, paving the way for future financial independence and wealth accumulation through real estate. This contrasts with the less competitive environment their parents encountered, making early homeownership less critical for them.”

Housing in a single of only a few remaining methods for millennials to meaningfully construct wealth. Millennials see shopping for a residence as a precious funding as an alternative of a monetary legal responsibility, Matthew Ricci, a 15-year mortgage lending veteran, tells Fortune. 

“Millennials are much more engaged with financial investing and independence than their parents’ generation,” says Ricci, a residence mortgage specialist at Churchill Mortgage, citing on-line funding instruments and different methods that give this era a higher understanding of rising their internet price by investments—together with actual property. 

A recent survey by Chase reveals that whereas 90% of millennials and Gen Zers see proudly owning a residence as a “smart investment,” greater than half are open to coownership. We’re already beginning to see this pattern extra in millennial houses, the place family and friends are shopping for houses collectively.

Sure, some millennials are drawn to the thought of a white picket fence and nesting, however different members of this era strictly see homebuying as a good monetary transfer. Indeed, there has been a rise in the apply of “house hacking,” or renting out half or all of a residence for additional revenue, a November Zillow report reveals. 

Millennials and Gen Zers are doing this as a way to afford sky-high residence costs and steep mortgage charges. More than half of these patrons view home hacking as “very” or “extremely” necessary in having the ability to afford a residence, in comparison with 39% of homebuyers of all ages.

Still, not all economists are shopping for the generational narrative. LendingTree Senior Economist Jacob Channel argues that whereas at present’s younger individuals actually could possibly be dealing with better pressures, BofA’s examine isn’t precisely evaluating apples to apples. That’s as a result of it’s tough to nail down how members of completely different generations truly evaluate to 1 one other at the identical age, he says.

“Just because a group feels like they currently want to do something, like own a home, more than another group did sometime in the past, that doesn’t mean that they actually do,” he tells Fortune. However, “it’s nonetheless still clear that homeownership is still important to most Americans, regardless of which generation they come from.”

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