As the largest generation in American history, millennials are reaching their peak buying age and becoming a major driver of the housing boom. Especially after the COVID-19 pandemic, more millennials hope to own larger homes with dedicated office space for remote work. The millennial push has reshaped the property investment market in many ways. For example, they are swapping flats for single-family homes. Many of them moved to cheaper areas like Phoenix, which is more affordable than expensive cities such as San Francisco. However, housing supply constraints and bidding wars still make home ownership difficult for some millennials.
Millennials account for over 60% of property sales growth
According to research firm CoreLogic, millennials were responsible for more than 60% of property sales growth in 2020. As more millennials reach their peak buying age of around 32, their demand is becoming a major factor in the market. American builders may need to construct 2 million new homes per year to meet the demand, much higher than the 1.6 million housing starts in 2021. Millennials now make up the fastest growing segment of buyers and have accounted for over 50% of mortgage applications in recent years. Clearly, they have become the main force driving the growth in housing investment.
Millennials desire larger, affordable single-family homes
The millennial push goes beyond demographics changes. After COVID-19 lockdowns, more of them want dedicated home office space for remote work. Those owning homes already are trading up to larger spaces. Millennials are swapping flats for single-family units that are more suitable for raising families. Many cannot afford expensive coastal cities anymore and are moving inland to cheaper areas like Phoenix, Tampa, Austin, etc. A typical renter in San Francisco would need to save for 6-7 years to afford a 20% down payment in Phoenix, while it would take over 70 years for a similar home in San Francisco. The shift to remote work is making inland regions much more attractive now for millennial home buyers and investors.
Housing shortages and bidding wars limit affordability
While the growing millennial population will continue powering housing demand, affordability remains a major barrier for many. Housing supply constraints make it difficult for builders to construct enough new units. As inventory hits record lows, fierce bidding wars are breaking out in many regions.first-time buyers often lose out to investors and face fewer affordable options. If supply shortages and rising rates are not addressed, millennial home ownership rates could drop. More policy support is needed to help young families enter the property investment market, especially in unaffordable cities.
In summary, millennials have clearly become the main driver of housing market growth based on their sheer numbers and peak buying age. Their preferences are reshaping property investment trends across America. But severe shortages and bidding wars are squeezing millennials out of the market. More construction and policy support are essential for improving affordability.