If millennials hadn’t spent so much money on avocado toast, they’d all own their dream home by now–right? Wrong. Just over half of millennials own their home. For the rest, housing costs have soared so much in recent years that skipping the avocado toast in their 20s wouldn’t have made a dent.
The story isn’t about constant struggle, though–it’s about timing. Elder millennials who bought a home in their early 30s had it better than baby boomers did at the same age: Historically low mortgage rates and higher household incomes meant those millennials spent about 27% of their income on housing at age 30, compared with 36% for boomers. Then the pandemic changed the math. Mortgage rates jumped from around 3% to nearly 7%, and home prices surged. Since rates rose above 6% in 2022, elder millennials have spent up to 35% of their income on monthly mortgage payments, compared with roughly 25% for boomers at the same age–even though millennials earn more, adjusted for inflation.
Boomers might point out that mortgage rates were much higher in their day. They’d be right: Rates peaked at over 16% in 1981 and stayed in double digits for much of the decade. But prices were lower. In the 1980s, when many boomers were in their 30s, the typical U.S. home sold for about $235,000 to $265,000 in today’s dollars. When elder millennials reached the same age–prime homebuying age–in the 2010s and 2020s, typical prices ranged from about $275,000 to $455,000.