Buying a home was always part of the future painted for millennials and Gen Zers. Earlier generations told them to go to college, get a job and you’ll make enough to put money down on a house. However, reality turned out to be wildly different for young people. These are the factors influencing the latest homeowner trends for younger generations and average home values.
The Real Estate Market Creates More Competitive Home Values
Baby boomers only had to compete with other prospective homeowners when they bought their starter homes. Now, young people have to compete in a market driven by corporations and investors. These entities buy properties and flip them into rental units, driving up local rent while taking houses off the market. It gives the lesser number of properties higher home values because there’s more demand.
This issue is so pressing that the Senate Committee on Banking, Housing and Urban Affairs introduced a bill to limit tax breaks for corporate landlords to improve the housing market’s affordability and availability issues. Otherwise, young people need much more money to buy homes before corporations can flip the properties.
Average Salaries Aren’t Rising Fast Enough
The silent generation and baby boomers earned around $5,000 less per year on average after college graduation. The same data reveals how college-graduate millennials and Gen Zers only make slightly higher modern wages. Middle-class wages have seen only a 6% increase since 1979, whereas people in upper-class positions making high wages experienced a 41% increase in wages during the same period.
Research also shows that 41%-48% of millennials say their student loans prevent them from saving for a home. After paying monthly bills for necessities, young people give most of their leftover income to student loan companies charging locked interest rates.
Compare that percentage to the 30% of boomers who were paying student loans when getting their first houses. That was also at a time when college cost much less. Since the 1970s, public and private universities have started charging students between 245%-310% more for the same degrees. The increased loan sizes and resulting monthly payments are more of a burden on younger people trying to put money away to pay for things like modern home values and other life goals.
Home Values Are Skyrocketing
People buying a new home in 1981 paid $68,900 in total compared to the average new home cost of $427,400 in 2023. The higher price for modern homes relates to their limited market availability and rising inflation.
Some young people consider getting homes without traditional resources like realtors to save money on fees, but even that could result in overpaying for the property because they don’t have experience negotiating. Ultimately, young people struggle to save a down-payment for starter homes due to the average cost before negotiating ever begins.
Inflation Is Consistently Much Higher
The national inflation rate fluctuates yearly, but its long-term averages can keep people out of homeownership. Millennials and Gen Zers have been living with some of the highest inflation rates since 1981, which is around the time when boomers were buying their first homes.
Higher inflation increases the cost of everything. Materials get more expensive, so goods and services become more costly. Housing prices skyrocket while loans take on higher interest rates to match the market. Young people living with the average low modern wage get price-locked out of homeownership before they ever explore an open house.
Homeownership Trends Require New Generational Solutions
Systemic challenges influence the trends and home values keeping millennials and Gen Zers away from homeownership. While baby boomers and the generations before them might have only needed a better job or higher education to achieve the wealth necessary to buy a home, those paths aren’t available to many young people anymore. Understanding these primary market influencers is crucial to better gauge the generational homeownership gap.
