Housing MarketReal Estate

Boomers struggled more than millennials to buy their first homes: Realtor.com

The debt-to-income ratio for millennials turning 30 is lower than the ratio for baby boomers at the same age

From rising home prices to rising mortgage rates and inflation, the millennial generation hasn’t had it easy when it comes to homeownership. But new data from Realtor.com shows that millennials aren’t overly burdened in comparison to previous generations.

The analysis of historic home prices, income levels and mortgage rates found that baby boomers — Americans between the ages of 60 and 78 this year — “arguably faced the toughest housing market ever for first-time buyers.“ In 1980, when boomers were entering their prime homebuying years, mortgage rates spiked above 16% and the average monthly home loan payment jumped 34% year over year.

“During the years when boomers turned 30, the share of median household income needed to make the typical mortgage payment averaged 33.2%, the highest of any living generation,“ the report explained. “In contrast, millennials on average faced the lowest mortgage burdens, thanks to a decade of ultralow interest rates following the Great Recession.“

The analysis calculated the typical mortgage payment as a share of median income by using the average 30-year fixed rate on a median-priced existing home. It assumed a 10% down payment and did not factor in property taxes or homeowners insurance.

For millennials turning 30, the typical mortgage payment has averaged only 22.5% of their median income. That’s lower that the 25.8% share for Generation X (ages 44 to 59 in 2024) and the 22.6% share for the Silent Generation (ages 79 to 96 in 2024).

Realtor.com noted that “reliable mortgage data“ only dates back to the early 1970s, which covers only a portion of the first-time homebuyer experience for the Silent Generation. And the youngest millennials (ages 28 to 43 this year) don’t turn 30 until 2026, so there is time for this trend to shift.

A front-end debt-to-income (DTI) ratio of 28% is a commonly cited ceiling for mortgage affordability, but there have been times for each generation when DTIs have risen above 30%, as they’ve done in each of the past two years.

Still, these ratios were far higher during the peak years of the boomer-led housing market of the 1980s. The analysis found that the highest DTI ratio ever recorded was 53.69% in the third quarter of 1981, when the oldest boomers were turning 35.

Ratios dropped steadily over the next 30 years before ascending again over the past decade. For millennials entering the market at the start of the COVID-19 pandemic in 2020, the average DTI ratio was 20.25%. Today, it is 33.42%.

“Though today’s housing market is not the least affordable in history, it is the least affordable in 40 years and suffers from low inventory levels,” Hannah Jones, senior economic analyst at Realtor.com, said in the report. “Buyers in today’s market face high prices, high mortgage rates, and low levels of affordable inventory, making it exceptionally challenging to purchase a home as a first-time buyer.”

The analysis also attempted to answer the question of why more millennials haven’t bought homes based on these affordability metrics. It noted that inflation-adjusted home prices grew 18% for baby boomers, 23% for Generation X and 14% for millennials compared to the prior generation.

Data from the Berkeley Economic Review was cited, which showed that 45% of boomers were able to buy their first home between the ages of 25 and 34. But as of 2019, only 37% of millennials in that age range were homeowners.

The report noted that while boomers did not get saddled with the same student loan debt burdens as millennials, the job market of the 1980s was less friendly to potential first-time homebuyers.

The U.S. unemployment rate peaked at 10.8% at the end of 1982. It averaged 7% from 1976 to 1994 (the period when all boomers reached the age of 30). Millennials and Generation X, meanwhile, have seen average unemployment rates of only 5.6%.

David Clark, a retired economics professor at Marquette University, told Realtor.com that the housing crash of the late 2000s and the post-recession labor market took a toll on the millennial homeownership rate. Essentially, fewer millennials bought homes because there was much less certainty that prices would stabilize.

“They got to their 30s at the worst time possible for buying a home. You’re coming out of the Great Recession, and you’ve got a pretty weak labor market as a consequence,“ Clark said. “They’re saddled with some pretty significant college debt. And finally, this was not a smart time to buy a home, when prices were going down.”

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