A new Redfin report shows younger Americans were most likely to take out mortgages in 2023, with the lion’s share going to buyers under 35 (39.7%) and buyers aged 35-44 (26.5%).
That’s according to Redfin’s analysis of Home Mortgage Disclosure Act (HMDA) data on last year’s primary home purchases.
As for the rest of the year’s total mortgages:
- 16.1% were issued to buyers in the 45-54 age group
- 10.8% to buyers aged 55-64
- 5.4% to buyers aged 65-74
That breakdown of homebuyers by age hasn’t changed much over the last five years. Buyers of younger generations are still more likely to take out a mortgage, for several reasons.
1. Millennials and Gen Zers are aging into homeownership. The median age of first-time homebuyers in the U.S. is 35. Homeownership becomes financially feasible for buyers in their 20s and 30s; buyers in these age groups have had some time to save for a down payment and to build a strong credit history, enabling them to qualify for a mortgage. They may also be growing families of their own, further incentivizing a home purchase.
2. Many Americans see real estate as a safer long-term investment than the stock market or other traditional investment vehicles. Plus, it’s the one investment they can live in.
3. Younger Americans are more likely to take out loans for a home purchase rather than to pay in cash because they’ve had far less time, compared to buyers of older generations, to amass wealth or build equity from a previous home. Older buyers are more likely to buy a home with cash.
4. Younger buyers are also less likely to be deterred by high mortgage rates, largely because they’re less likely to be locked into a low mortgage rate with a current mortgage. Many have no experience of rates being as low as 3%, and the desire for homeownership is stronger than any argument for waiting until rates fall to 6% or lower.
2023 Homeownership rates by generation:
- 26% of Gen Zers owned their home in 2023
- 55% of Millennials
- 72% of Gen Xers
- 79% of Baby Boomers
Granted, Millennials and Gen Z have had less time than buyers of older generations to buy a home (let alone multiple homes). So, it’s not surprising that just over a quarter of Gen Zers are homeowners.
That said, the youngest generation of homebuyers, those 19 to 25 years of age, has a higher homeownership rate than Millennials and Gen Xers had at the same age.
One possible explanation for that is that some younger buyers are getting financial help from parents or other adult relatives to fund their home purchases:
