Another 27% of mortgages went to buyers aged
35-44. Young people take out the majority of mortgages because
they’re of prime homebuying age, gaining financial stability and
growing families. Plus, they’re less likely than older people to
pay cash.
(NASDAQ: RDFN) —Two in five (39.7%) new mortgages issued in 2023
went to homebuyers under 35, and 26.5% went to buyers aged 35-44.
Next came 45-54 year olds, who took out 16.1% of new mortgages,
55-64 year olds (10.8%), and 65-74 year olds (5.4%). That’s
according to a new report from Redfin (redfin.com), the
technology-powered real estate brokerage.
This is according to Redfin’s analysis of Home Mortgage
Disclosure Act (HMDA) data covering purchases of primary homes. It
does not cover purchases of investment properties or second
homes.
The breakdown of homebuyers by age has remained stable over the
last five years, with younger Americans as the most common mortgage
borrowers. The likelihood of taking out a mortgage declines as
people get older.
There are several reasons why people under 45 are taking out
most mortgages:
- Gen Zers and millennials are aging into homeownership; the
median age of first-time U.S. homebuyers is 35. People tend to be
in their late 20s or 30s when they buy their first home because
that’s when homeownership becomes financially feasible and
desirable: They’ve had time to save for down payments and qualify
for mortgages, and they may be growing their families.
- Many people view real estate as a safer long-term place to park
their money than the stock market or other traditional
investments.
- Younger buyers are likely to take out loans rather than pay for
homes in cash because they haven’t had much time to amass wealth
and/or build equity from the sale of a previous home. Older buyers
are more likely to pay in cash.
“First-time buyers aren’t as spooked by high rates as people who
are trying to move up to a bigger or better home,” said Antonia
Ketabchi, a Redfin Premier agent in Maryland. “High costs are still
a challenge, but younger people are excited about the fact that
they’re looking to buy their first home, and they’re not locked in
by a low mortgage rate because until now they’ve been renting.
Plus, they weren’t in the market three years ago when mortgage
rates were sitting under 3%, so they don’t have an ultra-low point
of comparison.”
Although Gen Zers and millennials were most likely to buy homes
last year, they still have lower overall homeownership rates than
older Americans, which stands to reason because they haven’t had as
much time to buy homes. Just over one-quarter (26%) of adult Gen
Zers owned their home in 2023, and 55% of millennials owned theirs.
That’s compared to a homeownership rate of 72% for Gen Xers, and
79% for baby boomers.
Gen Zers are catching up to older generations, though: 19-25
year olds have a higher homeownership rate than millennials and Gen
Xers when they were the same age.
Some Gen Zers, millennials get financial help from
family
Some young homebuyers got financial help from their parents or
other older family members to fund their purchases: 3.3% of
homebuyers under 35 had a co-borrower over the age of 55 on their
mortgage loan in 2023; for buyers aged 35-44, it was 2.8%.
The share of young buyers getting financial help from their
parents is much higher when taking into account cash gifts. More
than one-third of Gen Zers and millennials who plan to buy a home
soon expect to receive a cash gift from family to help fund their
down payment, according to a Redfin-commissioned survey fielded in
February 2024.
Buyers under 35 take out nearly half of all mortgages in some
Rust Belt metros
Gen Z and young millennial homebuyers took up the biggest piece
of the mortgage pie in relatively affordable Rust Belt metros in
2023. Nearly half (48%) of new mortgages issued in Pittsburgh went
to buyers under 35, the highest share of the 50 most populous U.S.
metros. It’s followed by Cincinnati (46.5%), Philadelphia (46.3%),
Detroit (46.1%) and Warren, MI (46%).
On the flip side, buyers under 35 took up the smallest share of
the mortgage pie in popular Florida retirement destinations, where
the populations tend to be older: 27.8% of new mortgages issued in
West Palm Beach last year went to people under 35, the smallest
share of the metros in this analysis, followed by Fort Lauderdale
(28.8%). Next come Anaheim, CA (31.7%), Orlando, FL (32%) and Las
Vegas (32.9%).
Buyers aged 35-44 take up biggest piece of mortgage pie in
Bay Area
The story is different for older millennials, who took out the
biggest share of mortgages in the Bay Area. In San Francisco, 37.8%
of new mortgages issued last year went to 35-44 year olds, the
biggest share of the metros in this analysis, followed closely by
Oakland (37.2%) and San Jose (37.1%). Next come Newark, NJ (34.5%)
and Los Angeles (34.5%). One reason older millennials are more
likely to take out mortgages in the Bay Area than other parts of
the country is because it’s ultra expensive, meaning many people
buy their first home in their late thirties and early forties.
Buyers aged 35-44 took out the smallest share of mortgages in
Cleveland (23.4%) and Detroit (23.4%). Next come Cincinnati
(23.7%), Phoenix (23.8%) and Warren, MI (23.9%). In Detroit,
Cincinnati, and Warren, it’s uncommon for 35-44 year olds to take
out mortgages because they’ve already purchased homes: As noted
above, those are three of the top five metros for mortgage
borrowers under 35.
To view the full report, including charts and metro-level data,
please visit:
https://www.redfin.com/news/gen-z-millennial-mortgages-2023
About Redfin
Redfin (www.redfin.com) is a technology-powered real estate
company. We help people find a place to live with brokerage,
rentals, lending, title insurance, and renovations services. We run
the country's #1 real estate brokerage site. Our customers can save
thousands in fees while working with a top agent. Our home-buying
customers see homes first with on-demand tours, and our lending and
title services help them close quickly. Customers selling a home
can have our renovations crew fix it up to sell for top dollar. Our
rentals business empowers millions nationwide to find apartments
and houses for rent. Since launching in 2006, we've saved customers
more than $1.6 billion in commissions. We serve more than 100
markets across the U.S. and Canada and employ over 4,000
people.
Redfin’s subsidiaries and affiliated brands include: Bay Equity
Home Loans®, Rent.™, Apartment Guide®, Title Forward® and
WalkScore®.
For more information or to contact a local Redfin real estate
agent, visit www.redfin.com. To learn about housing market trends
and download data, visit the Redfin Data Center. To be added to
Redfin's press release distribution list, email press@redfin.com.
To view Redfin's press center, click here.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20240520151242/en/
Redfin Journalist Services: Kenneth Applewhaite, 206-414-8880
press@redfin.com
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