Millennials shut out of the housing market, again

by Alyssa Fowers

An analysis of 60 years of Census and American Community Survey data showing how millennials are more likely to rent than any other generation at the same age, inspired by the rising age of home-buyers in the United States

The story was inspired by this chart from the National Association of Realtors, which showed the median age of homebuyers dropping for the first time in about a decade, and then spiking again the next year.

Original NAR chart and my remake for the story:

To understand the long, slow climb in median homeowner age across the previous 40 years, I analyzed data 90 million rows of data from Censuses and American Community Surveys going back to 1960. And to really understand how housing worked for young people, I took a different approach than most housing research. Most housing research looks only at the characteristics of the head of household—meaning that any adult that lived with their parents would be basically invisible in the data. Instead, I used household interrelationships from the Census microdata to look at members of all generations and determine whether they or their partners were heads of household, or whether their parents were heads of household.

This required a carefully thought-through analysis strategy because I needed to analyze about 8 gigabytes of data in R with the processing power of a MacBook. I achieved this by creating separate cross-tabulations for each individual Census and ACS sample, then combining those into one overarching summary table.

Looking at the share of each age group that lived in rentals (first chart) didn’t clearly illustrate the generational trend that I was interested in. So instead, I compared each generation at the same point in their lives. How many Millennials lived in their own homes between ages 25 and 34, and how did that compare to Gen X, the Baby Boomers, and the Silent Generation at the same age (second chart)?

I dug a little deeper to understand how Millennials were actually living, and found that they were more likely to live with their parents before age 35. Once they moved out, they were more likely to rent than previous generations at the same age:

That analysis illustrated the underlying trend behind the long rise in homebuying age since 2010. But why did the age of homebuyers skyrocket in the 2022 NAR report? Experts pointed me towards interest rates, which had begun rising in an attempt to tame inflation. I found that the final out-of-pocket cost for a home purchased with a mortgage in November 2022 could be nearly twice as expensive as the same home purchased in July 2021.

Economist Gray Kimborough summed up the dilemma well: “Anybody who already owned a house did very well. The problem is, if you go from renting to buying in a really expensive market, you don’t have the advantage of all the equity other people built up by happening to own a house in a market that got a lot more expensive.”

Process sketches