According to the National Association of Realtors, the median age of first-time homebuyers is 35 years old, which means that the millennial generation—generally regarded as individuals born between 1981 and 1996—has reached the stage in their lives where buying a home is often a top priority. Yet recently, the cost of homeownership has skyrocketed in large part due to an adverse combination of high interest rates and scarce inventory, leaving millennials with a daunting homeownership outlook.
U.S. Mortgage Originations Over Time
U.S. mortgage originations have dropped to multi-decade lows following the COVID-19 surge
Source: Construction Coverage analysis of Federal Reserve Bank of New York data | Image Credit: Construction Coverage
This difficult homebuying landscape has resulted in a dramatic shift in mortgage originations. Prior to the COVID-19 pandemic, U.S. mortgage originations were already on the rise—climbing from $422 billion in Q1 2019 (after adjusting for inflation) to a 14-year high of nearly $907 billion in Q4 2019. After a brief dip due to pandemic-era stay-at-home orders and social distancing, originated mortgage volume skyrocketed to a new high of over $1.4 trillion in Q2 2021. This abrupt growth is mostly attributed to historically low interest rates, low inventory, and an increased desire for more space amid the pandemic.
However, these conditions were short-lived. Elevated interest rates combined with other forces, such as return-to-office mandates, brought inflation-adjusted mortgage originations down to just $334 billion in Q1 2023, the lowest levels in over two decades. As of Q1 2024, originations remain near historical lows at $403 billion.
Residential Mortgage Characteristics by Applicant Age
Millennials are buying homes with larger loan-to-value ratios than older generations
Source: Construction Coverage analysis of Home Mortgage Disclosure Act data | Image Credit: Construction Coverage…