Millennial Homebuyers: What the 2023 Housing Market Looks Like for Gen Y and Gen Z


Millennials were already having a hard time becoming homeowners, but as new data shows, 2022 only added fuel to the fire.

According to the 2022 Profile of Home Buyers and Sellers report from the National Association of Realtors (NAR), millennials are no longer the biggest cohort of homebuyers as they were in 2020 and 2021. Instead, it’s 55- to 74-year-old buyers who take the crown, accounting for 44% of all home purchases so far this year.

Young millennials, who are typically first-time homebuyers, made up just 14% of purchases – down from nearly a quarter in 2021.

“The share of first-time homebuyers dropped to the lowest level we've ever recorded,” says Jessica Lautz, deputy chief economist and vice president of research at NAR. “What’s really striking about the first-time homebuyers this year is that the median age moved to 36 years old. We’re now seeing a first-time homebuyer who's now closer to 40 than they are to 30.”

Skyrocketing home prices, a housing supply shortage, and decade-high mortgage rates are largely to blame for millennials’ pullback from the market, but still, these young consumers are determined to buy homes. A survey from Bank of America shows that 67% of millennials – also known as Gen Y – are “likely” to buy a house in the next two years.

Gen Z, which tops out at age 25, is set on it, too. In fact, nearly 9 in 10 say they’d like to own a home in the future.

The question is will they be able to? And what conditions will they face if they try? Here’s what industry experts say these Gen Z and millennial homebuyers can expect from 2023’s housing market – and how to succeed if they dive in.

The 2023 Housing Market 

Limited supply has plagued the housing market in recent years, and it’s part of why prices have climbed so steeply.

Unfortunately, most don’t see this changing any time soon. While listings have increased in recent weeks, the active inventory is down 38% compared to 2017-2019 levels. And with homebuilders pulling back and many existing homeowners sitting on record-low mortgage rates, a huge influx of inventory just isn’t in the cards for next year’s millennial and Gen Z buyers.

“For the next five to seven years, it's still going to be a pretty tight inventory environment,” says Lisa Sturtevant, chief economist at Bright MLS, which focuses on the mid-Atlantic region. “About 75% of homeowners now have a sub-4% mortgage, and even if mortgage rates do come down, if you're sitting on a 2.5% to 3% mortgage, and you don't have to move, you're not going to.”

As Sturtevant mentions, falling mortgage rates could be something that can further millennial home buying goals in 2023. Rates have crept down from their 2022 high of 7.08% and settled into the mid- to low-6% range. With the Federal Reserve easing back on its rate hikes as of its December meeting, mortgage rates could be poised to fall even more.

“There is light at the end of the tunnel,” says Glenn Brunker, president of mortgage lender Ally Home. “Inflation should lighten up next spring, and we’ll start to see interest rates dropping and homes getting more affordable.”

While that’s good news for young buyers, it could also mean more competition for the already limited supply of houses.

“Home prices are quickly dropping due to lowered demand with the spike in rates,” says John Jones, owner/broker at John Jones Real Estate in Murfreesboro, Tennessee. “However, when rates improve in the spring, which we expect they will based on inflation data, these demographics will find themselves back in the same bidding wars we've seen the past two years “

Homebuying Strategies for Gen Y and Gen Z

These challenges shouldn’t dash Gen Z and millennial homeownership dreams entirely, but it will require some extra creativity for those looking to buy in the new year. Here are a few strategies that industry pros say can help:

Choose your location and property carefully.

One option is to buy further out from big cities and suburbs – in smaller towns and more rural spots, where home prices tend to be more affordable. According to NAR, 19% of buyers moved to rural areas this year – the highest share since at least 2013.

“What we have seen is that millennial buyers and first-time homebuyers seem to be more willing to move to more affordable areas,” Lautz says.

Buying a home that needs a little work can also be helpful. These may offer a discount over more move-in-ready homes, and there could be less competition for them, too.

As Odest Riley, owner of real estate and lending company WLM Financial in Inglewood, California, explains, “The best advice I could give a millennial buyer in 2023 is to look for diamonds in the rough – homes that have been sitting on the market for much too long, maybe they need a little paint and new flooring.”

Ask for help.

You can also ask for help with your mortgage rate if the one you’re quoted is too high for your budget. Referred to as “buying points” or a “rate buydown,” these allow you, the seller, your real estate agent or another party to pay an upfront fee, which reduces your rate permanently or, in many cases, for only the first few years of your loan.

According to Anthony Marguleas, founder of Amalfi Estates, the 2-1 buydown has been a popular tool for younger folks looking to buy a house in today’s higher-rate environment.

“This is where an impound account is set up, and the seller puts money aside,” Marguleas says. “The buyer then gets a 2% decrease in their interest rate in the first year and 1% in the second year.”

It would return to the full interest rate by the third year.

Getting help in other areas of the deal is common, too. Over 20% of first-time homebuyers last year used money from friends or family for their down payment. Another nearly 40% co-purchased their home, splitting the costs with a parent, friend or sibling.

Take your time.

Finally, don’t rush into it. Take time to improve your credit score – which, in turn, can reduce your mortgage rate – and research lenders thoroughly before jumping in.

“Go check out different lenders and see what kind of rates and terms you can get,” Sturtevant says. “There's a lot of variability in rates right now.”

If you don’t have the funds to afford a house in 2023’s market, you can also consider moving in with a friend or family member to save on rent temporarily. That’s what 27% of first-time buyers did last year, according to NAR.

“If you're willing to make those types of financial sacrifices or housing sacrifices,” Lautz says, “you may just be able to achieve homeownership easier than your peers.”



Work With Jason

Drawing on his decade of experience in finance, investment management, and holistic financial planning, and as a Chartered Financial Analyst ( CFA ® ) charterholder, he leverages his financial acumen and analytical focus to help his clients navigate the sophisticated San Francisco market.
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