The fall usually marks the beginning of the school year, seasonally cooler weather and a seasonally cooler housing market. But, this year, the housing market’s typical autumn slowdown is more pronounced as rapidly rising interest rates discourage buyers and sellers from entering the market. The housing market is not immune to business cycles, and the current rising mortgage rate environment makes conditions difficult for the housing market. But there are fundamental and long-term drivers of housing demand that will position the housing market to rebound once the dust settles from the current challenging economic conditions. One of those drivers is education.
We’re often told that education is the key to a more secure financial future. Most people spend at least 12 years of their lives as students and even more if they pursue higher education. But does more education equate to increased earning potential? And, if so, does the increased earning potential translate to a greater likelihood of becoming a homeowner? If education is the key to a more secure financial future, and in turn homeownership, then millennials are on the right track.
“Millennials’ pursuit of higher education is good news for the housing market in the long run, because education is the key to unlock both greater earning power and, in turn, homeownership.”
Does More Education Equate to Higher Earnings?
The millennial generation, those between the ages of 25 and 40 in 2021, is the largest living adult generation. Many millennials are well into their careers, while others are still in school. According to our research, millennials are the most educated generation in American history.
Approximately 38 percent of millennials have a bachelor’s degree or higher, compared with 32 percent of Generation X and 15 percent of baby boomers when they were the same age. Millennials also earned their bachelor’s degrees much faster than previous generations. By their mid-40s, 30 percent of baby boomers had a bachelor’s degree or higher, Generation X reached that mark by their late 20s, but millennials achieved the same educational milestone by their mid-20s.
However, education takes time and money. Millennials have delayed key lifestyle decisions in favor of investing in the pursuit of education, pushing marriage and family formation to their early-to-mid-30s. Previous generations made these lifestyle choices in their 20s. Marriage and family formation are two of the most powerful motivations for homeownership, so these delayed lifestyle choices tend to also delay the desire for homeownership. However, when the time comes to become a homeowner, the earning power benefits of higher educational attainment are real.
The Investment Pays Off
In 2020, millennials with a bachelor’s degree had a median household income of over $100,000, while those with at least a graduate degree had a median household income of over $120,000. Compare those income levels with the median household income of millennials with just a high school degree (or some college) of $60,000 and the earning power benefits of higher education are undeniable. The income difference is even more stark when compared with millennials with no high school degree, who have a median household income of $35,000, further underscoring the importance of and connection between educational achievement and earning power.
Higher household income has positive implications for house-buying power, and as it turns out, the likelihood of purchasing a home. The homeownership rate for millennials with a bachelor’s degree in 2021 was 9 percentage points higher than those with just a high school degree. Nevertheless, we know that millennials have a lower homeownership rate compared with their generational predecessors. At age 30, 42 percent of millennials owned homes, compared with 48 percent of Gen Xers at the same age. Yet, millennials have significantly narrowed this gap as they move into a new phase of their lives. At the same age of 40, the millennial homeownership rate is 60.3 percent, while Gen X stood at 63.5 percent.
The importance of education to homeownership continues to increase over time. The impact of educational attainment on the likelihood of homeownership has more than doubled in 20 years. In 2000, the difference in the homeownership rate between those with a high school degree and those with a college degree was 3.7 percentage point. By 2021, this gap more than doubled to 7.5 percentage points. Millennials pursuit of higher education is good news for the housing market in the long run, because education is the key to unlock both greater earning power and, in turn, homeownership.
FAQs
Higher household income has positive implications for house-buying power, and as it turns out, the likelihood of purchasing a home. The homeownership rate for millennials with a bachelor's degree in 2021 was 9 percentage points higher than those with just a high school degree.
Why are millennials waiting longer to buy houses? ›
The changing dynamic of getting married and having children means Millennials are staying at home with family longer and delaying the purchase of their first home. "Life events such as getting married or having children are typical triggers to buying a home.
How do millennials feel about home ownership? ›
Millennials value homeownership: 71 percent cite it as a component of the American Dream, according to Bankrate's 2024 Home Affordability Report. However, they're also hindered by affordability challenges.
Why are more millennials living at home? ›
What's happening: Younger generations may be staying home to save on expenses like rent or a future down payment, says Adina Dragos, research analyst at RentCafe, an apartment search website. More young adults could also be choosing to care for family members, Dragos tells Axios.
Why are millennials more educated? ›
Millennial Education and the Workplace
Millennials are the most educated generation ever. This trend is likely due to higher income returns from a college education, as well as many young people choosing to wait out the recession and lack of jobs by staying in or returning to school.
Why are millennials renting instead of buying? ›
Instead of pursuing the traditional American Dream, Millennials believe that their wealth will be in their savings account and, most importantly to them, the experiences they gain while living. As such, the short-term costs of renting are far easier to bear than those that come with purchasing a home.
Why is it harder for Gen Z to buy a house? ›
Why is it harder for Gen Z to buy a house? The challenge faced by Generation Z in purchasing homes stems from several factors. First, they are grappling with significant student loan debt, which impacts their creditworthiness and ability to save for down payments.
Are 52% of millennials homeowners? ›
The homeownership rate for millennials rose to 54.8 percent from 52 percent, and the homeownership rate for Gen X rose to 72 percent from 70.5 percent. Baby boomer homeownership changed little, up 78.8 percent from 78.7 percent in 2022.
What is the millennial housing crisis? ›
Part of the Millennial housing crisis is due to the fact that they would rather put their money elsewhere. This generation typically wants more in the way of experience than possession, and that's helping fuel the turn away from big boomer houses.
What is the buying behavior of millennials? ›
Millennials trust others' opinions online. Therefore, beyond the price of online offers, customer reviews are a crucial purchase factor, making social media key in the Millennial shopping journey, as platforms are ripe with short-form video content reviewing specific products and brands.
But on many fronts, Millennials are struggling. Incarceration rates among Millennial young adults are dramatically higher than they were when members of the Silent Generation and Baby Boom were the same age. The federal minimum wage hasn't risen since 2009, but inflation and cost of living have.
What do millennials value most in life? ›
Millennials embody a set of evolving values and aspirations that greatly influence their choices and behaviors. This generation highly values authority, achievement, and influence, demonstrating a strong desire for control, success, and recognition.
Where do most millennials want to live? ›
The 10 Most Desirable U.S. Cities for Millennials
- Austin, Texas.
- Phoenix, Arizona.
- Orlando, Florida.
- Denver, Colorado.
- Washington, D.C.
- Raleigh, North Carolina.
- Seattle, Washington.
- Nashville, Tennessee.
Millennials were the first generation to feel the impact of access. Access caused Millennials to have different perspectives, expectations, and behaviors. Access changed how Millennials job search, learn, socialize, travel, communicate, build businesses, network, entertain themselves, sell, buy, and work.
What generation is the best educated? ›
Highly educated
Generation Z students are on track to become the most educated generation. They have higher high school graduation rates and lower dropout rates than those who came before.
Which generation is the most successful? ›
Wealthiest Generation: Baby Boomers
"If people earned and saved and invested the same percentage of their income for 20 years or more, they've accumulated more than someone who has done this for five or 10 years,” he says. Another reason for this generation's wealth is owning and then selling a successful business.
What is the average age millennials buy a house? ›
The average age of a US homebuyer in 2021 was 33, according to the National Association of Realtors; in 2023, it was 35. In California, it's at age 49 that over half of residents are homeowners, per the study. That's not to say that millennials outside California are experiencing completely smooth sailing.
How many millennials can't afford homes? ›
The survey found that 63% of Americans can't afford to buy a home this year, with 87% of Gen Z unable to and 62% of millennials unable to. Given the housing market, 1 in 4 surveyed no longer believe that homeownership is a good investment in the long run, and 1 in 3 don't believe it should still be the American dream.
Which generation is buying the most homes? ›
The homeownership rate for millennials rose to 54.8 percent from 52 percent, and the homeownership rate for Gen X rose to 72 percent from 70.5 percent. Baby boomer homeownership changed little, up 78.8 percent from 78.7 percent in 2022.
