Millennials see significant rise in wealth through strategic home investments

Millennial Marissa Jannetti entered the housing market at an opportune time. In 2018, she and her husband, early in their careers, decided to buy a home instead of renting. They used an FHA loan requiring only a 3.5% down payment to purchase a four-bedroom condo in Orange County, CA, listed just over $430,000.

"We were pretty house-broke for a while," Jannetti explains. "We didn’t go out. We made meals at home." Despite initial financial strain, they refinanced their mortgage in 2020 when rates dropped to 3.15%, reducing their monthly costs by about $1,000.

Data from the Federal Reserve Bank of St. Louis indicates that millennials like Jannetti have seen significant wealth increases recently. The median household net worth of older millennials more than doubled from $60,000 in 2019 to $130,000 in 2022. Millennials and older Gen Z-ers had approximately 25% more wealth than previous generations at similar ages as of early 2024.

Realtor.com® Chief Economist Danielle Hale notes that younger households often have more wealth tied up in real estate: "In the second quarter of 2024, real estate made up 42% of millennial assets compared to 30% for Gen X."

Jonathan Spears from Spears Group at Compass highlights that millennials who bought homes before the pandemic saw rapid equity growth: "The last five years was maybe one of the greatest time frames in United States history for wealth accumulation and growth."

However, rising home values present challenges for those wanting to move. Jannetti mentions the “golden handcuffs” problem: moving could mean significantly higher monthly costs due to current low mortgage rates on existing homes.

Richard Redmond from Redmond Mortgage Capital believes millennial homeowners are financially well-positioned: "What could have been a better investment? Perhaps Bitcoin or Tesla, but realistically, real estate has been a really good, safe bet."

Spears encourages non-homeowners to enter the market soon despite high prices and rates: "The best time was yesterday... Jump in." He suggests taking advantage of less competition now compared to peak times like 2020.