Pandemic Accelerated Millennial Homeownership Demand

Millennial homeownership now has the greatest influence on the housing market

By Odeta Kushi

The broadening role of the home in American life powered the housing market to multiple records during this unprecedented time: the fastest house price appreciation since 2005, the lowest days on market in the history of record-keeping, the lowest mortgage rates ever and the greatest cumulative number of purchase mortgage applications since 2008. But, while the pandemic accelerated the demand for homeownership, homeownership was on the upswing before the pandemic hit. Fueled by a combination of demographic and economic factors, the homeownership rate has risen steadily since reaching a generational low of 63 percent in 2016, and 2020 was no different.

The homeownership rate is influenced by underlying demographic and economic factors, as well as housing market conditions. Close examination of these underlying forces can provide a more in-depth understanding of the changes in the homeownership rate over time. Our annual Homeownership Progress Index (HPRI) accounts for the influence of critical lifestyle, societal and economic trends on the likelihood of owning a home, providing a measure of potential homeownership demand.

Homeownership Rate Continues to Underperform Potential

A historical comparison of the homeownership rate with potential homeownership demand according to the HPRI reveals that from 2000 through 2009 the actual homeownership rate exceeded potential homeownership demand by an average of 1.7 percentage points. When the actual homeownership rate exceeds the HPRI, it indicates that the homeownership rate is above the levels supported by demographic and economic fundamentals and may be elevated by other market dynamics. 

However, since 2010, potential homeownership demand, based on the lifestyle, societal and economic factors tracked in our HPRI model, has exceeded the actual homeownership rate. When the HPRI exceeds the actual homeownership rate, it indicates that homeownership may be restricted by market forces, like an historically low supply of homes for sale. While the ongoing housing supply shortage has likely hindered the actual homeownership rate, potential demand has strengthened further as a result of demographic and lifestyle dynamics.

In 2020, rising house-buying power, driven primarily by low mortgage rates, was a primary driver of potential demand. Between 2011 and 2020, the annual average of the 30-year, fixed-rate mortgage has been near or below 4.5 percent, significantly below the pre-2011 average of 8.9 percent. In 2020, mortgage rates fell to their lowest annual level in history (3.1 percent), boosting house-buying power and further elevating potential homeownership demand, which exceeded the actual homeownership rate by 3.8 percentage points.

Millennials Continue to Drive Potential Homeownership Demand

Millennials are the largest generation in U.S. history, and the majority turned 30 in 2020. Historically, millennials have delayed the critical lifestyle choices often linked to buying a first home, including getting married and having children, in order to further their education. This is clear in cross-generational comparisons of homeownership rates which show millennials lagging their generational predecessors. At age 30, 42 percent of millennials own homes, compared with 48 percent of Gen Xers and 51 percent of Baby Boomers at the same age. Yet, millennials are narrowing this gap as they move into a new phase of their lives.

In 2020, potential homeownership demand improved by 3.5 percentage points for millennials, the largest increase among the major generational cohorts. Generation Z followed with a 2.5 percentage point increase in the HPRI, Generation X increased by 2.1 percentage points and Baby Boomers increased by 1.3 percentage points. While millennial homeownership has been delayed relative to their generational predecessors, millennials now have the greatest influence on the housing market and remain poised to fuel a “roaring 20s” of homeownership demand.

Despite the pandemic-driven economic downturn in 2020, millennials continued to age into the key lifestyle decisions that increase the likelihood of homeownership.

Despite the pandemic-driven economic downturn in 2020, millennials continued to age into the key lifestyle decisions that increase the likelihood of homeownership. In 2021, while faster nominal house price appreciation may begin to erode the affordability boost from low mortgage rates and rising income, these lifestyle decisions will persist. Buying a home is both a financial and lifestyle decision, and despite growing affordability headwinds, millennials continue to transition to their prime homebuying age, helping to boost potential homeownership demand in the years ahead.

Odeta Kushi is the deputy chief economist at First American. To view the full post, visit

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