Photo Credit: fizkes / Shutterstock
The shift to remote work during the COVID-19 pandemic coincided with a significant increase in Americans relocating from high-cost urban centers like New York, Los Angeles, and the Bay Area to smaller and more affordable communities. This large-scale migration, however, has contributed to a growing challenge of housing affordability in these previously lower-cost areas, and the resulting surge in demand pushed U.S. home prices to record highs.
Despite a modest recent decline in prices from COVID-era highs, housing affordability remains a challenge for Americans, particularly millennials entering their prime homeownership years. Nearly half of U.S. homeowners and renters report struggling to afford their housing payments—often resorting to significant sacrifices to manage these expenses—and 14% of millennials have tapped into their retirement savings to cover housing payments, despite the oldest millennials still being two decades from the traditional retirement age. With low inventory and high interest rates a persistent challenge, millennials could be facing home affordability difficulties for years to come.
Trends in Millennial Homebuying
Millennial home purchase prices have stabilized after rising faster than their incomes
Source: Construction Coverage analysis of Home Mortgage Disclosure Act data | Image Credit: Construction Coverage
Millennials are squarely in the age range where Americans typically get ready to settle down, form households, and have children—all of which require more space, and for many, buying property. Millennials are also deep enough into their careers to have accumulated savings and paid down student loans, a significant barrier to homeownership. Yet while median millennial income has increased in the last five years, it was not until recent years that it outpaced the growth in home purchase prices for millennials.
The millennial homebuyer price-to-income ratio—or the ratio between what millennials are spending on homes versus what they make in a year—has finally stabilized after increasing significantly during the pandemic. In 2018 and 2019, the millennial homebuyer price-to-income ratio was 3.1 and 3.2, respectively. By 2021, the millennial homebuyer price-to-income ratio increased to a striking 3.6, and as of 2023, it sits at 3.3. Despite the millennial price-to-income ratio slightly easing last year, millennial home prices increased 40.7% since 2018 while their incomes only rose 31.6%, highlighting the mounting financial barriers for millennials when it comes to homeownership.
Home Purchase Price and Income by Age
Millennials are nearing their peak years for homebuyer income and home purchase price
Source: Construction Coverage analysis of Home Mortgage Disclosure Act data | Image Credit: Construction Coverage
In spite of the elevated gap between home prices and incomes for millennial buyers, millennials are entering their prime earning years, making it a pivotal time to buy. In 2023, the median income for millennial homebuyers stood at $125,000, which was 76% higher than the $71,000 median income of Gen Z buyers. Gen X homebuyers had the highest median income at $143,000, while older generations tended to have lower incomes. This suggests that millennial purchasing power is likely nearing its peak.
However, this advantage may be offset by the fact that millennials are also entering the years where they are likely to purchase more expensive homes. The median home purchase price for millennials in 2023 was $415,000. That’s nearly 77% higher than the median home purchase price for Gen Z buyers, and second only to the Gen X median purchase price of $445,000.
Geographical Differences in Millennial Home Purchase Price
Millennials in Arkansas, North Dakota, and Illinois are buying homes priced well above their state averages
Source: Construction Coverage analysis of Home Mortgage Disclosure Act data | Image Credit: Construction Coverage
The nation’s largest generation has begun buying homes at a time when housing inflation is necessitating more expensive home purchases. At the state level, millennials are buying the most expensive homes in coastal areas like Hawaii ($785,000), California ($755,000), Washington ($635,000), and Massachusetts ($605,000).
However, it’s important to note that the median prices for homebuyers of all ages in these states—Hawaii ($795,000), California ($735,000), Washington ($615,000), and Massachusetts ($605,000)—are also the highest in the country. So while millennial purchases are more expensive in these coastal states in absolute terms, the gap between millennial home purchase prices and the median purchase price across all buyers is greatest in parts of the South and Midwest. In states like Arkansas, North Dakota, and Illinois, millennials are spending at least 6% more on homes than what is typical across all buyers.
Below is a breakdown of the metros and states where millennials are buying the most expensive homes. The analysis was conducted by Construction Coverage, a website comparing construction software and insurance, using data from the Federal Financial Institutions Examination Council’s Home Mortgage Disclosure Act dataset. For more detailed information, refer to the methodology section.
Large Metros Where Millennials Are Buying the Most Expensive Homes
Midsize Metros Where Millennials Are Buying the Most Expensive Homes
Small Metros Where Millennials Are Buying the Most Expensive Homes
States Where Millennials Are Buying the Most Expensive Homes
Methodology
Photo Credit: fizkes / Shutterstock
The data used in this analysis comes from the Federal Financial Institutions Examination Council’s 2023 Home Mortgage Disclosure Act. To determine the locations where millennials are buying the most expensive homes, researchers at Construction Coverage compared the median price for conventional residential homes with an originated mortgage in 2023 for millennials and all buyers. Millennials were defined to be ages 25 to 44 in the year 2023. In the event of a tie, the location with the greater median millennial home value was ranked higher. To improve relevance, only metropolitan areas with complete data were included, and metros were grouped into cohorts based on population size: small (less than 350,000), midsize (350,000–999,999), and large (1,000,000 or more).
For complete results, see Cities Where Millennials Are Buying the Most Expensive Homes on Construction Coverage.
