Millennials, Gen Z To Play Major Role In 2022 Housing Market

As homebuyer demographics change, Millennials and Gen Z are set to play a major role in the housing market this year, according to a new report from ServiceLink.

ServiceLink’s 2022 State of Homebuying Report uses information from 1,000 homeowners who purchased a home in the last five years to analyze generational trends in homebuying.

The report found that Millennials and Gen Z are making big moves in the housing market and are open to non-traditional routes to homeownership.

“As bidding wars, low inventory and rising interest rates continue to intensify the competition, buyers have had to get creative in order to come out ahead in this challenging real estate market,” said Dave Steinmetz, president of origination services, ServiceLink. 

“Our study suggests that a growing number of buyers are embracing technology, and many are open to new pathways to achieve homeownership. This indicates there is an opportunity for lenders to provide more targeted resources and guidance to buyers throughout their homebuying journey.”

Of Millennial and Gen Z shoppers, 26% are likely to buy a home this year, compared to 12% of Gen X and 6% of baby boomers.

They are more likely than other generations to buy a home without seeing it in person first (23%). They are also more open to buying homes at auction, with 55% reporting they already have or would be willing to buy at auction, compared to 50% of Gen X and 23% of baby boomers.

But buyer burnout is affecting all generations, with 24% of recent buyers considering buying a home in the last five years but ultimately deciding against it. Potential buyers were put off by high prices (44%) or said their financial situation changed enough to deter them (29%).

Low housing inventory was cited as a specific deterrent by 28% of respondents, a 20% jump from last year’s report.

Stock shortages have buoyed housing demand through interest rate increases as home shoppers compete for a limited number of houses. As a result, home price growth has reached record highs. February home prices jumped 20% YOY and 2.2% from the prior month.

Home price appreciation particularly affects younger homebuyers, who typically have lowers incomes and less credit than older shoppers.

Young homebuyers took advantage of historically low-interest rates in 2020, accounting for 22% of homebuyers, a record high for the age group. But the share fell back to pre-pandemic levels in 2021 and further declined at the beginning of 2022. 

Technology was cited as the best benefit to the homebuying experience, with 72% of respondents saying that convenience and ease of use were the most helpful factors in homebuying tech.

Though rising interest rates have pushed refi applications down, 32% of Gen Z and Millennials are still planning to refinance this year. Securing a better rate was the top reason for interest in refis.

However, a quarter of respondents have already refinanced, and 64% said they are not likely at all to refinance in 2022, up from 50% in last years’ report.