A seismic shift is underway in wealth dynamics, and millennials are emerging as the frontrunners. This generation, aged 28 to 43, is witnessing a dramatic increase in their net worth, often doubling in just a few years. The primary driver of this financial windfall? Homeownership. This trend positions millennials ahead of previous generations in terms of asset accumulation at similar ages.
The story of Marissa Jannetti and her husband exemplifies this trend. In 2018, they purchased a four-bedroom condo in Orange County, California, using an FHA loan for just over $430,000. Despite initial financial strain, their decision to enter the housing market proved incredibly profitable. When mortgage rates plummeted during the early stages of the COVID-19 pandemic in 2020, the couple refinanced, reducing their monthly payments by a substantial $1,000 and rapidly building equity.
Data from the Federal Reserve Bank of St. Louis confirms this trend. The median household net worth of older millennials born in the 1980s doubled from $60,000 in 2019 to $130,000 in 2022. As of earlier this year, millennials and older Gen Z-ers had accumulated roughly 25% more wealth than previous generations at a comparable age, adjusting for inflation.
According to Realtor.com, the primary factor behind this wealth surge is real estate investments. “Younger households tend to have a greater share of their wealth tied up in real estate,” says Danielle Hale, Realtor Chief Economist. In the second quarter of 2023, real estate comprised 42% of millennial assets, significantly higher than for other generations.
The COVID-19 pandemic further amplified this trend. Jonathan Spears, founder of Spears Group at Compass, notes that millennials who bought homes before the pandemic witnessed exponential growth in their wealth. “The last five years was maybe one of the greatest time frames in United States history for wealth accumulation and growth,” Spears states.
However, this financial windfall isn’t without its challenges. Many millennial homeowners now find themselves in a “golden handcuffs” situation. With low mortgage rates locked in, the prospect of moving to a larger home often means facing higher monthly costs, leading many to stay put longer than initially planned.
Despite these rate-lock constraints, Richard Redmond, founder of Redmond Mortgage Capital, believes millennial homeowners should be proud of their investment. “What could have been a better investment? Perhaps Bitcoin or Tesla but realistically, real estate has been a really good, safe bet,” Redmond told Realtor.com.
Industry experts remain optimistic about millennials who have yet to enter the housing market. Spears encourages potential buyers to get into the market as soon as possible, even with current high interest rates. He suggests employing strategies like “dating the rate,” where buyers initially accept a higher rate with plans to refinance when rates drop.
The current market conditions, characterized by high rates but less competition, offer unique advantages for new buyers, according to Realtor. “Back in 2020, you may not even be able to get the house you wanted because you’ve got 30 other offers that can go all-cash, with no contingencies and no inspections. Now, it’s different,” Spears explains.
While challenges remain, especially for those yet to purchase their first home, the millennial generation’s success in leveraging homeownership for financial growth sets a compelling precedent for future homebuyers. Their story underscores the enduring power of real estate as a wealth-building tool, even in a dynamic and evolving market.
