For a myriad of reasons, millennials, America’s largest generation, are becoming homeowners later in life and at lower rates than the generations of Americans that preceded them. 

The rapid expansion of the middle-class after World War II made owning a home easier and, ultimately, a symbol of the American dream. But according to the Urban Institute’s Millennial Homeownership report from 2018, the millennial homeownership rate is 8 percentage points lower that of Gen X and baby boomers at the same age. The report estimates 3.4 million more people would be homeowners had the rate of ownership kept up with previous generations. Currently, 32.2% of millennials own a home, meaning approximately 24 million are current homeowners.

The current economic climate, even with record-low interest rates on mortgages, may not help to spur a major reversal in the trend. It has become common for young adults to choose living at home in the past few years due to financial challenges. In 2018, about 25 million Americans ages 18 to 34 were already living at home, per a Pew analysis of data from the Census Bureau. The Covid-19 pandemic has compounded the personal finance struggles of many younger Americans.

Millennial debt

Millennials are the most educated generation in American history but many still carry the burden of student loan debt. The Pew Research Center found that the number of households with student loan debt doubled from 1998 to 2016. The median amount of debt millennials carry was $19,000, higher than the $12,800 Gen Xers carried. 

The Urban Institute study found that it takes only a 1% increase in student debt to decrease the likelihood of owning a home. As millennials’ debt-to-income ratios increase, they are less likely to be able to save for a down payment. 

Paying rent in expensive cities 

Along with carrying expensive student loans, millennials are choosing to rent for longer in locations that tend to more expensive. The Urban Institute found that nearly half of households headed by people 18 to 34 were rent-burdened, meaning that they are paying upwards of 30% of their paycheck just to cover rent. 

“Over the past decade, a greater share of millennials with higher educational attainment chose to live in cities where the housing supply is inelastic. Because these cities are less affordable, their homeownership rate would have been negatively affected by this migration pattern.”

The report points out that more educated households move to cities with an already highly skilled population. Take cities like New York or San Francisco, known as centers of finance and innovation, and also known for being incredibly expensive to live in. 

Covid-19 has led to rents falling in big cities as more knowledge workers flee urban areas, helped by a major shift in employer work-from-home policies which look to become permanent at many companies. But that is also driving up home prices in the suburbs.

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Delaying marriage 

Millennials are marrying later in life. In 1960, the average age of a first marriage was early 20s, but today the median age for marriage is closer to late 20s. Most men do not marry until at least 29, according to Pew Research Center. 

According to the Urban Institute, being married increased the probability of owning a home by 18 percentage points. The report estimates that if marriage rates in 2015 were on par with marriage rates in 1990, millennial homeownership with be 5% higher. 

Mortgage lenders and diversity challenges 

Compared to earlier generations of Americans, millennials are more racially and ethnically diverse. Yet discrimination among lenders prevents many non-white households from gaining the mortgages they need to buy a home. According to an August survey by real estate technology company Zillow, the majority of Black homebuyers (59%) are concerned about qualifying for a mortgage, compared to less than half (46%) of white buyers. 

That is because lenders deny mortgages for Black applicants at a rate 80% higher than that of White applicants, according to 2020 data from the Home Mortgage Disclosure Act.

Furthermore, between 1990 and 2015, the share of White households dropped 16 percentage points, from 76 to 60 percent. During that period, Hispanics’ share increased 9 percentage points, Asian Americans’ share increased 3 percentage points, and Blacks’ share increased 2 percentage points. But during this period of time, the homeownership rate of almost all groups (except Hispanics) dropped, with the greatest decline observed among Black households, dropping 6 percentage points. Today, the homeownership rate among black millennials is 26.2 percent lower than that of white millennials.