As a group, millennials are spending longer in school and getting a later start on having children and establishing families. This lifestyle trend affects their housing decisions as well, since millennials are slower to form households and—once started—have for the last few years been putting off owning in favor of renting. But as the Great Recession fades and millennials age, their relationship with the housing market will change as well.

New precedent

The Mortgage Bankers Association’s (MBA) researchers have pinpointed three key factors that are shaping how the millennials interact with housing: demographics, long-term social trends and the hangover from the Great Recession.

The demographics of the millennials are unlike anything we have seen before. They are the children of the baby boomers, and will shape American culture just as much as the boomers have. The millennials are far more diverse and over the next ten years will be passing through ages that accompany life’s most significant stages: graduating, moving out on one’s own, marrying; having children and buying their first home.

"These changes mean increasing demand—especially for affordable, first-time homebuyer products—and a need for increasing outreach to traditionally underserved communities."

But a number of long-term trends and the Great Recession mean millennials aren’t following the same path their parents followed. Some trends, like longer schooling and later child rearing, have been in the works for decades. Others, like the rise in young adults bunking in their parents’ homes, bloomed with the Great Recession and appear ready to fade.

New picture

When you put it all together, you get a large, diverse group that will demand a range of housing options and products.

By 2024, the aging of the millennials will increase the number of homeowners aged 18-44 by 4.3 million households, and the number of renters in that age group by 700,000. (Millennials have already been boosting rental demand for years.)

The growth will be driven by 2.1 million additional Hispanic households, 1 million more non-Hispanic White households, 780,000 African-American households, almost 700,000 additional Asian households and 520,000 households of other races and ethnicities. For the mortgage market, these changes mean increasing demand—especially for affordable, first-time homebuyer products—and a need for increasing outreach to traditionally underserved communities.

It also highlights a continuing need for financing for multifamily and other rental products. Whether for renting or owning, first-time or move-up buyer, the mortgage market will need to fire on all cylinders to provide the capital millennials will be looking for.