Young Adult Homeowners Have it Better Than Their Parents

Today’s 25-year-olds have it better than their parents when it comes to homeownership: Almost 30% of those young adults owned their homes in 2022, more their Gen X parents achieved when they were 25, according to a report by brokerage Redfin.

People who came of age during the pandemic benefitted from a confluence of economic tides: low mortgage rates, an abundance of available jobs, and the ability to work remotely that means they can buy homes in affordable areas. On top of that, the government paused student loan repayments and some of them moved in with their parents during the pandemic—two reasons they've saved money for down payments.

People between the ages of 19 to 25 "were part of the pandemic-driven homebuying frenzy," Redfin Chief Economist Daryl Fairweather said in the report. "While the oldest of their generation had just graduated college when the pandemic started and hadn’t started building up their bank accounts, they had some financial advantages."

A typical mortgage rate for homebuyers under 25 using a conventional loan was 3.3% in 2020 and 3.1% in 2021, according to Redfin. Rates and home prices have jumped in the past year, however, meaning those buying patterns may not continue.

In 2021, a 25-year-old’s median monthly mortgage payment was $1,013, which amounts to 16% of their $74,900 median income. That’s on par with what 25-year-olds in 1990 paid for a mortgage in relation to their income, the report said. Back then, a young adult had a median $904 monthly loan payment—or 16% of their $69,419 median income, when adjusted for inflation.

The youngest homebuyers–in the age group known as Generation Z-had some other advantages in recent years. Homebuyers without children could focus on smaller houses, and not insist on being in a particular neighborhood or school district. The rise of remote work made their choices even more geographically flexible, to places outside big coastal cities where homes are relatively more affordable.

People under the age of 25 bought about 9% of the primary homes that sold in Virginia Beach last year, a bigger share than anywhere else in the country, Redfin said. Cincinnati was second, with 8.5% of its homebuyers last year under the age of 25.  The share in Detroit was 7.9% and in St. Louis, 7.5%

In each of those metros, the typical home bought by member of Generation Z sold for $255,000 or less in 2022.  

Young adults who missed the buying window may be shut out of the market.

"Gen Zers who don’t yet own homes face several obstacles and may fall behind," the report said. "Low mortgage rates helped some Gen Zers buy homes with relatively low incomes over the last few years, but many are priced out now that rates are above 6% and home prices remain well
above pre-pandemic levels."