Here’s How Millennials and Gen Z Afford Housing in 2025
Written by
Martin Dasko
Edited by
Amber Barkley
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According to a recent study from Realtor.com, millennials and Gen Z are “pent up” when it comes to housing — there were 1.6 million fewer households for those between 18 and 44 than expected. This means that around 1.6 million expected Gen Z and millennial households didn’t come together last year, mainly due to a lack of affordable housing. The total housing gap was 3.8 million in 2024, and many younger people are sharing households rather than living alone.
Here’s a look at what this situation means for the housing market and how younger people can afford housing. Also, check out real housing costs for younger generations.
Pent-Up Demand Is Shaping the Housing Market
Kevin Huang, an associate real estate broker at Elegran Forbes Global Properties, said the pent-up demand from millennials and Gen Z is one of the most powerful dynamics in today’s housing market.
He explained, “Millions of young adults are ready to buy, but affordability challenges and limited inventory are keeping them on the sidelines. This mismatch is driving sustained price pressure, especially in supply-constrained markets already dealing with rising construction costs.”
The Realtor.com report disclosed that just under one million households were formed in 2024, the lowest annual rate since 2016. During this same time, 1.36 million homes were started, but the housing gap continues because of the pent-up household demand historically.
“The built-up demand among Gen Z and millennials is more about limited access to inventory and affordability and less about lack of interest in homeownership,” said Paul Herskovitz, a real estate expert and founder of Discount Lots. “The Realtor.com study highlights a glaring truth: We’ve got a generation ready to buy, but the market forgot to build them homes.”
With a lack of available homes, the entire market looks different, and its impact will likely be felt for many more years as young people struggle to transition to the next stage of life and older generations hold on to their homes. If housing inventory doesn’t increase, these younger generations will have to continue renting longer and may be unable to afford the elevated real estate prices.
Housing Prices Aren’t Coming Down as Quickly
“Younger buyers are facing tough competition in a market where limited entry-level inventory and cash-rich offers make it harder to secure a foothold,” said Herskovitz. “For buyers aged 18-44, there are 1.6 million fewer households, which not only puts pressure on prices, it reshapes the entire market.”
The most recent data from Redfin found that housing prices were up 3.1% in February on an annual basis, with the median selling price at $424,810. The average number of homes sold was down 5% annually. With real estate prices increasing drastically since the COVID-19 pandemic, many young people are struggling to save up for a down payment and may have to wait much longer to enter the housing market.
Young Buyers Are Getting Creative About Housing
Herskovitz shared that despite the challenges, Gen Z and millennials aren’t giving up as they choose to embrace creativity regarding housing options.
Herskovitz listed the following creative options:
- Relocating to secondary or rural markets where homes and land are more affordable.
- House-hacking by purchasing a multi-unit property where they live in one unit and rent out the rest.
- Teaming up with friends or family to co-purchase properties instead of waiting to save up.
- Exploring rent-to-own models or purchasing land first and building later.
Younger generations are aware that they must be more creative if they want to become homeowners, so they’re exploring options that weren’t as common a generation ago. It’s not rare to find out that someone has purchased a home and is renting out space to cover the monthly mortgage payments due to higher housing prices combined with elevated interest rates. Platforms like Airbnb and Vrbo have made listing any extra space you may have easier.
Young People Are Relying On Unique Work-Related Opportunities
“Remote work has also enabled migration to more affordable markets, like the southeast region,” Huang said.
With more people embracing remote work opportunities, those who can’t afford real estate in their hometowns have been able to relocate to more affordable regions of the country. As more people move to these regions, the local housing markets will continue to change due to the influx of residents and potential supply issues.
Developers Are Shrinking Home Sizes
“On the supply side, developers are responding by shrinking home sizes to contain costs,” said Huang. “Smaller, more efficient homes — especially in walkable, amenity-rich areas — align well with the values of younger buyers, who prioritize location and flexibility over space.”
Gen Z and millennials may have to accept that they won’t be able to afford the same size of home they grew up in. Developers are also trying to increase the supply by offering smaller houses and other creative options, like alternate dwelling units on existing properties.
The Future of Housing for Millennials and Gen Z
“Looking forward, modular and prefabricated homes may be key to addressing affordability at scale,” Huang said. “Faster and less expensive to build, they offer a practical solution for developers and a pathway to ownership for younger generations.”
The experts agree that until there’s meaningful relief in housing prices and affordability improves, many in the younger generations will have to rent for much longer as they try to save up to enter the market.
Herskovitz concluded, “Until inventory catches up, the name of the game is strategy, not size. Gen Z and millennials may be priced out of the traditional path, but they’re building new ones — with digital tools, shared ownership models and smarter investment thinking.”
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