As has been extensively documented, Millennials face an uphill battle in homebuying owing to everything from higher unemployment rates and student debt to affordability challenges.

The latest commentary at Fannie Mae suggests that on the affordability front, things are improving, even as demand from younger buyers continues to decline.

“The Great Recession and housing bust hit young adults hard. The unemployment rate for 25-34 year-olds more than doubled between 2007 and 2010, and real median household income for this group fell by nearly 10 percent during the downturn,” writes Patrick Simmons, director of strategic planning for the economic research group at Fannie. “As economic conditions deteriorated, young-adult household formation and homeownership fell sharply. In recent years, however, young Americans’ economic circumstances have begun to brighten, with the unemployment rate for 25-34 year olds dropping and their income stabilizing.”

Fannie Mae's Economic & Strategic Research Group analyzed data from the Census Bureau's newly released 2013 American Community Survey, which shows that two key metrics of housing demand – the headship rate and homeownership rate – continue to decline for young adults, despite their recent economic gains.

“The continued slide in household formation and homeownership among young adults suggests that more robust labor market improvements, among other factors, are needed for young Americans to get a stronger foothold in the housing market,” Simmons said. “The large decline in homeowner affordability problems among young adults indicates that substantial housing market changes in the wake of the housing bust have created a generation of young homeowners who have housing costs that are much better aligned with incomes.”

To read more, click here for the latest Housing Insights.