Young Americans are financing homes at a record pace—with Gen Z and Millennial homebuyers accounting for 40% of new mortgages in 2023.

According to data from Redfin — 39.7% of new mortgages issued in 2023 went to homebuyers under 35 and 26.5% went to buyers aged 35-44. Adult Gen Z buyers were 18-26 years old in 2023, and millennials were 27-42.

“First-time buyers aren’t as spooked by high rates as people who are trying to move up to a bigger or better home,” said Antonia Ketabchi, a Redfin Premier agent in Maryland.

“High costs are still a challenge, but younger people are excited about the fact that they’re looking to buy their first home, and they’re not locked in by a low mortgage rate because until now they’ve been renting.”

Ketabchi adds that first-time buyers weren’t in the housing market looking to buy three years ago when rates were sitting under 3% — so they don’t have an ultra-low point of comparison to today’s interest rates.

Despite younger buyers’ increased demand for mortgages, they still account for the lowest total homeownership rates among American homeowners.

Just over 25% of adult Gen Zers owned their home in 2023, while 55% of millennials owned theirs.

”That’s compared to a homeownership rate of 72% for Gen Xers, and 79% for baby boomers,” Redfin wrote.

A stalled housing recovery

In 2023, home sales plunged to a nearly 30-year low due in large part to surging mortgage rates, a shortage of available properties, and rising real estate prices.

U.S. home sales totaled just over 4 million last year, an 18.7% decline from 2022 and the weakest year of sales since 1995. "We need more inventory to get the market moving,” said Lawrence Yun, the National Association of Realtors’ chief economist.

In the first half of 2024, home supply ticked up, fueling hope that this year would see a strong rebound in the housing sector. But with 30-year fixed-rate mortgages surging past 7% in April, experts expect a "subdued recovery" at best.

“We expect mortgage rates to drop back from 6.8% currently to 6.25% by the end of the year,” said Thomas Ryan, property economist with Capital Economics.

“In our view, that modest fall won’t be enough to unwind mortgage rate ‘lock-in’ and bring a great deal more stock onto the market. Because of that, we’re forecasting a subdued recovery in sales volumes to 4.3 million by end-2024.”

Gen Z better positioned than their peers

Despite market forces working against them, the homeownership rate for Gen Zers between the ages of 19-25 is higher than those for millennials and Gen Xers when they were the same age.

According to data from Redfin, 27.8% of 24-year-old Gen Zers owned a home, compared with 24.5% of millennials when they were 24. When Gen Xers were 24 only 23.5% were homeowners.

”The only Gen Zers who are tracking behind prior generations are 26-year-olds, who were the oldest Gen Zers,” the report states.

Millennials fell victim to the Great Recession, which forced many of them to delay bigger purchases. Gen Xers, on the other hand, faced some of the highest interest rates—reaching 11% in 1989 when most of them were in their 20s.

”But now that mortgage rates are high, Gen Z isn’t any better poised to buy a home than millennials were at their age,” said Daryl Fairweather, Redfin’s chief economist.