Long on the sidelines, this population cohort is making up for lost time.
Communications manager Isabelle Novak and her partner, software executive Reid Gridley, represent a burgeoning population of millennials buying high-end homes across the country. (Leah Nash for The Washington Post)
The median price of a single-family home in Portland, Ore., reached $502,000 last year, a year-over-year increase of 15 percent in a property market that ranks as one of the hottest in the country.
While that hasn’t been good news for many first-time buyers in Oregon’s largest city, it didn’t deter Isabelle Novak from embarking on purchasing her first home.
Novak, 30, a communications manager, says she and her partner, software executive Reid Gridley, 29, looked at about 14 listings before making a bid on a three-bedroom bungalow-style home in the city’s Overlook neighborhood. The pair closed on the contract to buy the property in January — about two months after their search began — for $610,000.
Homeownership wasn’t a priority for the couple before the pandemic, Novak says. But that changed as the global contagion inched closer to the start of its third year.
“We always viewed our home as sort of a crash pad between traveling and work, but the pandemic really changed that dynamic for us,” says Novak, who is among a burgeoning population of millennials buying high-end homes across the country. “With both of us working from home and needing more space, we started viewing homeownership as more of an investment in our future.”
The millennial generation — born from 1981 to 1996 — had long been slow to embrace homeownership, studies showed, with many younger Americans in their mid-20s to late 30s reluctant or unable to buy a home.
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But after years of waiting on the sidelines, this generation is now pouring into homeownership at a record pace, accounting for the largest share of all home buyers in the United States in 2020, 37 percent, according to a survey by the National Association of Realtors (NAR). And now that they have surpassed the baby boomers to become the largest living adult generation in the United States, housing experts predict demand will remain strong for years to come.
While their impact is being felt across all sectors of the housing market, it’s more pronounced at the higher end, brokers say, with millennial buying power fueling rising home prices in some of the country’s priciest property markets.
Tech-heavy locations from Boston to Seattle, with a growing population of high-earning, educated younger professionals, are seeing the most activity, say brokers there. But real estate professionals in more affordable metro areas such as Nashville, Orlando and Providence, R.I., are also seeing an influx of affluent younger buyers pushing up housing prices amid dwindling supply.
In D.C., where the median price of a house or condo that sold last November reached an all-time high of $725,000, according to the Greater Capital Area Association of Realtors, younger buyers are fueling much of the sales activity, says Christie-Anne Weiss, senior vice president and associate broker at TTR Sotheby’s International Real Estate.
She says her team, which sells luxury homes in D.C., Maryland and Virginia, had 21 clients close contracts on home purchases last year, up from four in 2020. Sales prices from these clients ranged from about $400,000 to about $3 million, Weiss says.
Though much of that sales activity occurred in the popular Capitol Hill, 14th Street corridor and Georgetown districts, Weiss says tight housing inventory in D.C. also pushed buyers into affluent areas of Maryland and Virginia.
“We’ve never really seen this kind of impact from younger buyers before,” says Weiss, who has been selling real estate in the region for more than 30 years. “The sheer number of clients in their 20s and 30s looking to buy homes is making this market much more competitive, especially at the middle and higher end.”
High rents, low mortgage rates…
Millennial growth arrives as the United States remains in the midst of one of the sharpest spikes in homeownership in decades.
Home sales surged to a 15-year high in 2021, as low mortgage rates and a protracted pandemic helped fuel higher demand, according to NAR data. Home prices also grew at a record pace across the country last year as buyers in many markets contended with dwindling inventory and a faster pace of sales. The median existing-home price in 2021 reached a record $346,900, up 16.9 percent from 2020, according to the realty group. The median existing-home price in January reached $350,000, up 15.4 percent from the same 2020 period, according to the realty group.
Jessica Lautz, vice president of demographics and behavioral insights at the NAR, says aging millennials — those born in 1990 and entering their 30s — are embarking on their prime home-buying years and will likely continue driving up home sales in many places.
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“They’re reaching the age when they’re forming families and settling down,” Lautz says. She says buyers who bought their first home in their 20s are in an even better position to upgrade to larger homes with higher price tags. “They’re now entering the height of their careers and have the equity to purchase homes, especially higher-end homes.”
Anand Parikh, 33, and his fiance, Megha Patel, 32, began looking for their first home in New York last fall as the lease on their rental apartment was ending. The couple initially began searching for a larger rental apartment, but abandoned that idea after enduring tight supply and sharply rising rental prices.
“The rental market was pretty competitive,” says Patel, an attorney. “And prices were increasing to the point where we knew it would be smarter, financially, to own.”
The couple signed a contract in January to purchase a three-bedroom home in Boerum Hill, an affluent section of Brooklyn where the median price of condominium and co-op units sold in 2021 reached $1.275 million, according to the Corcoran Group. Measuring 1,400 square feet, it includes a large outdoor balcony in a building with a fitness center and yoga studio.
New York City is in one of its most robust real estate periods, with condo and co-op sales volume reaching nearly $7 billion in the fourth quarter of 2021, the highest of any fourth quarter on record, according to data from Compass.
“The larger space was important to us,” says Parikh, a partner at a real estate investment and development company. “We just got engaged and wanted a place we would grow into.”
Mallory Bogard of Serhant brokerage helped the couple find their new home. She says they are indicative of what she is seeing in the growing number of younger home buyers impacting the city’s property market.
“They’re reversing the conventional ideas of what a starter home means to first-time buyers,” says Bogard, who estimates that 70 percent of her clients last year were millennials, nearly double the number from the previous year. “Millennials are more affluent than older generations of first-time buyers and more savvy thanks to a better understanding of technology and that’s helping them make a bigger impact on this market.”
Growth in Latino buyers
Latino homeownership rates are seeing some of the sharpest spikes in the United States, with the number of Hispanic homeowners reaching 8.8 million in 2021, according to the National Association of Hispanic Real Estate Professionals (NAHREP). The industry group, which compiled Census Bureau data, says Latinos added a total of 657,000 new owner households between 2019 and 2021.
The Urban Institute projects that by 2040, 70 percent of the net new homeowner households in the United States will be Hispanic. And while Hispanics make up about 18 percent of the country’s population, the research organization says they accounted for more than half of the country’s homeownership growth in the decade leading up to the pandemic.
Much of that growth has been fueled by younger buyers, says NAHREP chief executive Gary Acosta, who expects Hispanic buying power to increase exponentially as more of the demographic age into their prime home-buying years.
“Hispanic millennials are starting to enter their early 30s now, which are typical years for first-time home buyers,” Acosta says. “So that will translate into continued strong home buyer growth and make this demographic a likely sustaining force in the housing market.”