Weekly Real Estate News
Summary
A November 12 Redfin study comparing inflation-adjusted housing costs across generations found elder millennials initially enjoyed more favorable purchase-payment burdens than baby boomers at the same age, but the post-2021 rate and price surge reversed that advantage. Its figures model buying the typical home and should not be read as actual mortgage payments of all households.
Older millennials entered their prime homebuying years with an affordability advantage over baby boomers at the same age. That advantage disappeared after the pandemic-era rise in prices and mortgage rates, according to a Redfin study published November 12.
Redfin estimates that an older millennial purchasing the typical home at age 30 would have spent about 27% of household income on housing, compared with 36% for a boomer at that age. For older millennials buying in their late 30s, however, the modeled burden climbed to as much as 35%, against roughly 25% for boomers at the same age.
Why the comparison changed
Borrowing costs were central to both generations’ experiences. Boomers who bought in the early 1980s faced mortgage rates above 16% at the peak, but subsequent decades offered repeated opportunities to refinance as rates declined. Many millennials entered the market during years of historically inexpensive financing, only to confront a sharp reversal when rates rose from around 3% in 2021 toward 7% in 2022.
Home prices also rose substantially during the pandemic. Redfin’s comparison puts the typical monthly payment for an elder millennial aged 40 to 44 at about $3,000, versus approximately $1,986 for a boomer at those ages, measured in today’s dollars. The comparison is intended to isolate generational buying conditions rather than track the actual bills of every homeowner.
Income growth did not fully offset the change. Redfin found that millennials generally earned more than boomers at equivalent ages after inflation adjustment, partly reflecting changes in workforce participation and household composition. But higher home prices and borrowing costs consumed that gain for households entering the market later.
What the model does and does not measure
The study uses Census household income data, Redfin sale-price data and historical house-price indexes. Its payment model assumes a 20% down payment, a 30-year fixed-rate mortgage at the average annual Freddie Mac rate, property taxes of 0.5% of the purchase price and annual homeowners insurance of 1.25%. All dollar values are adjusted to 2025 purchasing power.
These assumptions permit a consistent comparison across decades, but actual down payments, tax bills, insurance premiums and borrowing costs vary substantially. The millennial age-40-to-44 sample also covers only the oldest members of that generation, whereas the full baby-boomer generation has already passed through those ages.
For mortgage professionals, the study offers a useful explanation for why buyers with seemingly stronger incomes can still struggle to qualify. The payment on a newly originated mortgage depends on today’s home price and interest rate, while existing owners may carry loans secured years ago at much lower rates.
The same lock-in effect has implications for resale supply. WRE recently reported Realtor.com’s estimate of the payment gap confronting existing mortgage holders who buy again. Redfin’s longer historical comparison points to the unequal opportunities created by the year in which a household was able to purchase.
