The fall usually marks the beginning of the school year, seasonally cooler weather and a seasonally cooler housing market. But, this year, the housing market’s typical autumn slowdown is more pronounced as rapidly rising interest rates discourage buyers and sellers from entering the market. The housing market is not immune to business cycles, and the current rising mortgage rate environment makes conditions difficult for the housing market. But there are fundamental and long-term drivers of housing demand that will position the housing market to rebound once the dust settles from the current challenging economic conditions. One of those drivers is education.
We’re often told that education is the key to a more secure financial future. Most people spend at least 12 years of their lives as students and even more if they pursue higher education. But does more education equate to increased earning potential? And, if so, does the increased earning potential translate to a greater likelihood of becoming a homeowner? If education is the key to a more secure financial future, and in turn homeownership, then millennials are on the right track.
“Millennials’ pursuit of higher education is good news for the housing market in the long run, because education is the key to unlock both greater earning power and, in turn, homeownership.”
Does More Education Equate to Higher Earnings?
The millennial generation, those between the ages of 25 and 40 in 2021, is the largest living adult generation. Many millennials are well into their careers, while others are still in school. According to our research, millennials are the most educated generation in American history.
Approximately 38 percent of millennials have a bachelor’s degree or higher, compared with 32 percent of Generation X and 15 percent of baby boomers when they were the same age. Millennials also earned their bachelor’s degrees much faster than previous generations. By their mid-40s, 30 percent of baby boomers had a bachelor’s degree or higher, Generation X reached that mark by their late 20s, but millennials achieved the same educational milestone by their mid-20s.
However, education takes time and money. Millennials have delayed key lifestyle decisions in favor of investing in the pursuit of education, pushing marriage and family formation to their early-to-mid-30s. Previous generations made these lifestyle choices in their 20s. Marriage and family formation are two of the most powerful motivations for homeownership, so these delayed lifestyle choices tend to also delay the desire for homeownership. However, when the time comes to become a homeowner, the earning power benefits of higher educational attainment are real.
The Investment Pays Off
In 2020, millennials with a bachelor’s degree had a median household income of over $100,000, while those with at least a graduate degree had a median household income of over $120,000. Compare those income levels with the median household income of millennials with just a high school degree (or some college) of $60,000 and the earning power benefits of higher education are undeniable. The income difference is even more stark when compared with millennials with no high school degree, who have a median household income of $35,000, further underscoring the importance of and connection between educational achievement and earning power.
Higher household income has positive implications for house-buying power, and as it turns out, the likelihood of purchasing a home. The homeownership rate for millennials with a bachelor’s degree in 2021 was 9 percentage points higher than those with just a high school degree. Nevertheless, we know that millennials have a lower homeownership rate compared with their generational predecessors. At age 30, 42 percent of millennials owned homes, compared with 48 percent of Gen Xers at the same age. Yet, millennials have significantly narrowed this gap as they move into a new phase of their lives. At the same age of 40, the millennial homeownership rate is 60.3 percent, while Gen X stood at 63.5 percent.
The importance of education to homeownership continues to increase over time. The impact of educational attainment on the likelihood of homeownership has more than doubled in 20 years. In 2000, the difference in the homeownership rate between those with a high school degree and those with a college degree was 3.7 percentage point. By 2021, this gap more than doubled to 7.5 percentage points. Millennials pursuit of higher education is good news for the housing market in the long run, because education is the key to unlock both greater earning power and, in turn, homeownership.
FAQs
Buying a house may be increasingly challenging, but the significance of purchasing property has only gotten more important to those in a certain age group. More than any other generation, millennials believe making it — and truly making it — means buying a house, new research has found.
What is the trend in millennial homeownership rate? ›
2022 marked the first time that more than 50% of Millennials were homeowners, according to the most recent U.S. Census Bureau Current Population Survey data. In 2020 and 2021, many Millennials took advantage of low interest rates and increased opportunities for remote work and entered the housing market.
Why are millennials buying fewer homes than in previous generations? ›
Millennials are not buying homes as readily as the previous generation. Delaying marriage and having children is keeping many Millennials at home with their parents. Tighter lending criteria can also make homeownership unaffordable or virtually impossible for those without much credit history.
Are millennials the most educated generation in history? ›
According to our research, millennials are the most educated generation in American history. Approximately 38 percent of millennials have a bachelor's degree or higher, compared with 32 percent of Generation X and 15 percent of baby boomers when they were the same age.
Why are millennials still living at home? ›
What's happening: Younger generations may be staying home to save on expenses like rent or a future down payment, says Adina Dragos, research analyst at RentCafe, an apartment search website. More young adults could also be choosing to care for family members, Dragos tells Axios.
What is the buying behavior of millennials? ›
Millennials trust others' opinions online. Therefore, beyond the price of online offers, customer reviews are a crucial purchase factor, making social media key in the Millennial shopping journey, as platforms are ripe with short-form video content reviewing specific products and brands.
How do millennials afford a house? ›
Tips for Becoming a First-Time Home Buyer
- Start Saving More. You'll need money for a down payment, for closing costs, for taxes, for utilities, for an emergency fund for when the heater or AC goes out. ...
- Clean up Your Credit. ...
- Lean into It. ...
- Find a Real Estate Agent. ...
- Talk to a Lender. ...
- Redefine Your Hipster Attitude. ...
- Get Skilled.
Key Highlights. Millennials surpass baby boomers and become the largest group of home buyers at 38%. Nearly one out of three Gen Z buyers are single females.
Which generation is buying the most homes? ›
WASHINGTON (March 28, 2023) – The share of baby boomers has surpassed millennials and now makes up the largest generation of home buyers, according to the latest study from the National Association of Realtors®.
What generation is having the most conflict with millennials is? ›
Now, in recent years one could observe something that was often labeled a “generational conflict.” Thereby, people of the millennial generation (born between 1981 and 1996) directed a lot of anger, hate, and frustration at the baby boomers.
But on many fronts, Millennials are struggling. Incarceration rates among Millennial young adults are dramatically higher than they were when members of the Silent Generation and Baby Boom were the same age. The federal minimum wage hasn't risen since 2009, but inflation and cost of living have.
Why do millennials rent homes as opposed to buying them? ›
Instead of pursuing the traditional American Dream, Millennials believe that their wealth will be in their savings account and, most importantly to them, the experiences they gain while living. As such, the short-term costs of renting are far easier to bear than those that come with purchasing a home.
Where do the most educated millennials live? ›
States that house the most educated millennials are largely located in the Northeast and on the Eastern seaboard, led by Massachusetts, where 51 percent of millennials hold college degrees. The highly ranked states outside of this region include Minnesota, Illinois, and Colorado.
Which generation is the richest? ›
In an unprecedented financial shift, millennials are on the cusp of becoming the richest generation in history, with $90 trillion expected to be passed down to them over the next two decades.
How rich are millennials compared to boomers? ›
While Millennials, as a generation, are wealthier than Baby Boomers were (as is Generation X, it should be pointed out), two other facts remain true: Millennials in the 90th percentile, or Top 10%, have 20% more wealth than similar Baby Boomers did at the age of 35.
What type of housing do millennials want? ›
Millennials are looking for smaller, more affordable homes that feature low-maintenance outdoor spaces in vibrant neighborhoods. They're uninterested in the large, outdated houses of their parents and are instead seeking out more modern and energy-efficient places to live.
Which generation owns the most homes? ›
The trend is national, according to the Construction Coverage data, with boomers owning 38% of homes nationwide despite comprising just over 20% of the U.S. population.
What is the average age millennials buy a house? ›
Millennials, especially, are buying homes later in life compared to preceding generations. Some particularly telling statistics include: Younger millennials (23 to 31 years old) comprise only 18% of the share of homebuyers. 60% of older millennials (roughly 40-42 years old) own a home.
