Redfin Reports Gen Zers and Young Millennials Took Out 40% of U.S. Mortgages in 2023

Rhea-AI Summary

In 2023, 39.7% of new U.S. mortgages were taken out by homebuyers under 35, and 26.5% by those aged 35-44, according to Redfin's analysis of HMDA data. The share of mortgages decreases with age, with only 5.4% of new mortgages going to buyers aged 65-74. Young buyers prefer taking out loans over paying cash due to lesser accumulated wealth. Notably, Rust Belt metros like Pittsburgh and Detroit saw nearly half of new mortgages go to buyers under 35, while Florida's retirement hotspots had the lowest shares for this age group. The Bay Area saw the highest percentage of mortgages taken out by older millennials aged 35-44. Despite lower overall homeownership rates, younger buyers are increasingly entering the market, with some receiving financial help from family members.

Positive

• 39.7% of new mortgages were taken out by buyers under 35, indicating strong market entry by younger generations.
• 26.5% of new mortgages went to buyers aged 35-44, showing sustained buying activity among older millennials.
• Rust Belt metros like Pittsburgh and Detroit saw nearly half of new mortgages go to buyers under 35, indicating affordability in these areas.
• The Bay Area had the highest percentage of mortgages taken out by older millennials (35-44 years), suggesting robust demand in high-cost areas.
• Some younger buyers receive financial help from family, helping them enter the housing market.

Negative

• Older buyers are more likely to pay in cash, which could indicate barriers for younger buyers in accumulating wealth.
• Only 5.4% of new mortgages were taken out by buyers aged 65-74, indicating a decline in mortgage activity as age increases.
• In high-cost areas like the Bay Area, many buyers purchase their first home in their late thirties and early forties, suggesting affordability issues.
• Homeownership rates for Gen Z and millennials are still lower compared to Gen X and baby boomers, indicating potential challenges for younger buyers.

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.

SEATTLE--(BUSINESS WIRE)-- (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

Source: Redfin

FAQ

What percentage of new mortgages in 2023 were taken out by buyers under 35?

In 2023, 39.7% of new mortgages were taken out by buyers under 35.

How many new mortgages in 2023 were taken out by buyers aged 35-44?

In 2023, 26.5% of new mortgages were taken out by buyers aged 35-44.

Which age group took out the least percentage of new mortgages in 2023?

Buyers aged 65-74 took out the least percentage of new mortgages in 2023, accounting for just 5.4%.

Why do younger buyers prefer taking out loans over paying cash?

Younger buyers prefer taking out loans because they have less accumulated wealth and haven't built much equity from previous home sales.

Which metros had the highest share of new mortgages taken out by buyers under 35 in 2023?

Pittsburgh, Cincinnati, Philadelphia, Detroit, and Warren, MI had the highest share of new mortgages taken out by buyers under 35 in 2023.

What was the homeownership rate for Gen Z and millennials in 2023?

In 2023, 26% of adult Gen Zers and 55% of millennials owned their homes.

Why do older buyers tend to pay in cash?

Older buyers tend to pay in cash because they have had more time to accumulate wealth and build equity from previous home sales.

Which age group had the highest share of mortgages in the Bay Area in 2023?

In 2023, buyers aged 35-44 had the highest share of mortgages in the Bay Area, with 37.8% in San Francisco.