Although some unique, pandemic-related economic factors have contributed to the current state of the real estate market, some of the largest structural factors driving the current market are generational.
Baby boomers—those born be- tween 1946 and 1964—are in- creasingly choosing to age in place as they reach retirement.
Simultaneously, millennials, who were born between 1981 and 1996, are now America’s largest generational cohort and at a peak age for buying a first or second
home.
Together, these forces mean that
more buyers are competing for fewer homes.
And according to Freddie Mac, the supply of homes for sale was already at a record low prior to the pandemic.
Despite the residential real estate
market showing signs of cooling off after a historic runup during the COVID-19 pandemic, finding a home remains challenging for many buyers.
Intense competition and rising prices have made it especially dif- ficult for young, first-time home- buyers to make a purchase.
The real estate cool-off is also evidenced by changing home pur- chase loan volume.
The total number of conven- tional home loans originated in 2022 was down across all age groups from the year prior.
Among all age cohorts, 65–74 year-olds experienced the largest percentage decline, decreasing by 22.3%.
However, younger homebuyers saw smaller decreases in home purchase volume.
Notably, the under-25 age group only experienced a 12.3% decline, the smallest of all cohorts and a sign of persistent housing demand from younger generations despite economic headwinds.
Even prior to 2022, homeown- ership interest has been increasing among young buyers in recent years.
The homeownership rate for
adults under 25 reached 25.7% in 2020, matching a previous peak from the height of the housing bubble in 2005.
Although that figure dipped slightly in 2021, the under-25 homeownership rate sat at 25.4% in 2022, well above rates seen in the 1980s and 1990s.
For young adults interested in homeownership, some geographic locations prove more favorable than others.
Many of the states with the high- est shares of home purchase loans from adults under age 25 are found in the Midwest, led by Iowa at 11.5%.
The Midwest tends to have lower home prices, which makes home purchases more attainable for younger homebuyers who often have less home equity built up than their older counterparts.
The same trend holds at the local level, with many of the top metro- politan areas for young home- owners also found in the affordable Midwest.
In contrast, high-cost coastal states including Hawaii (1.6%) and California (1.9%) have much lower shares of home purchase loans from young adults. In these areas, would-be young home- buyers face more expensive homes and higher living costs, creating a higher barrier to entry in these real estate markets.
This analysis was conducted by researchers at Construction Cover- age, a website that provides con- struction insurance guides, using data from the Federal Financial In- stitutions Examination Council. For more information, refer to the methodology section.
The analysis found that 5.5% of conventional home purchase loans in the Milwaukee metro area were taken out by applicants under 25 years old, with a median loan amount of $205,000.
Among all large U.S. metros, Milwaukee has the 15th most homebuyers under 25. Here is a summary of the data for the Mil- waukee-Waukesha, WI metro area: • Under-25 share of home purchase loans: 5.5%
• Total under-25 home purchase loans: 905
• Median loan amount: $205,000
• Median loan-to-value
ratio: 90.5%
• Median interest rate: 5.125% For reference, here are the statis- tics for the entire United States: • Under-25 share of home purchase loans: 4.5%
• Total under-25 home purchase loans: 142,218
• Median loan
amount: $205,000
• Median loan-to-value
ratio: 92%
• Median interest rate: 5.250%