Dream of homeownership still alive with young buyers
Millennial and Gen Z buyers have a higher tolerance for elevated mortgage rates, and many believe it’s a good time to buy, a Realtor.com survey found.
Key points:
- Nearly half of prospective millennial buyers said they’d be willing to buy a home if mortgage rates topped 8%, compared with just 19% of Gen Xers and 7% of boomers.
- Millennials were also most optimistic about the buying timeline: 43% of those surveyed thought they would be able to afford a home within the next year.
- More than half of millennials and 40% of Gen Zers said now was a good time to buy.
Despite the continued volatility of mortgage rates, housing inventory and affordability, many prospective homebuyers believe they will eventually make it to the closing table.
And according to a recent survey from Realtor.com, a big chunk of those hopefuls said they'd be willing to make a purchase even with elevated mortgage rates. Of the buyers surveyed, 40% said buying a home would be more feasible if rates dropped below 6%, while another 32% of buyers said that they'd be more willing to purchase a home if rates dropped below 5%.
But views on buying a home in a higher interest rate climate varied significantly by generation. When asked if they would buy a home if mortgage rates topped 8%, more than a third (37%) of Gen Z respondents and nearly half (47%) of millennials said that they would. However, only 19% of Gen Xers and 7% of boomers said they would purchase a home at that borrowing rate.
A similar pattern emerged when respondents were asked if now is a good time to buy a home. Perhaps surprisingly, 40% of Gen Zers and 55% of millennials said now was a good time to buy, while only 32% of those in the Gen X cohort and 17% of boomers agreed with the sentiment.
The vast majority — more than 80% — of both boomers and the older Silent Generation said it was not a good time to buy a home. That response is consistent with other consumer sentiment surveys, including Fannie Mae's Home Purchase Sentiment Index, which reported in its two most recent surveys that even as consumers are feeling more optimistic about interest rates, only 17% believe it is a good time to buy.
Still, hope springs eternal among younger buyers. When Realtor.com asked prospective buyers when they might be able to buy a home, millennials were the most optimistic — 43% of those surveyed believed they would be able to afford a home within the next year. And since millennials are the largest generational cohort — and have increased their homeownership rate — that could be good news for the 2024 market.
Only 22% of Gen Zers thought they could afford a home in that timeframe, but 45% said they would be able to afford a home within the next five years.
Even as mortgage rates remain stubbornly in the upper-6% range (and appear to be trending higher), the willingness of younger buyers to move forward with a purchase, despite higher rates, could drive some momentum in the housing market.
That "optimistic lens," plus a decline in mortgage rates from their fall peak, appears to be contributing to an uptick in new listings and closings, said Danielle Hale, chief economist at Realtor.com.
"The current market is very different from where it was before the pandemic, but many Americans still have a positive outlook towards achieving the dream of buying a home," Hale said.