Despite challenges such as soaring mortgage rates and high home prices, the housing market remains resilient, largely thanks to the influence of millennials. As the largest generation in U.S. history, millennials continue to shape the market's future and drive housing demand.

According to a recent analysis by Ned Davis Research's chief economist Alejandra Grindal and research analyst London Stockton, millennials are expected to lead the country's "household formation" and contribute to housing demand throughout the decade. This projection is based on data from the U.S. Census Bureau, which highlights the growing trend of millennials forming households.

Millennials have already emerged as significant players in the homebuying market, accounting for around 60% of homes purchased with mortgages in recent years, as reported by Redfin. Bank of America economists have previously noted that sales activity is likely to be bolstered by millennials reaching their prime homebuying age, thereby helping the housing market maintain its momentum.

One crucial factor that supports the housing market's stability is the limited supply of available homes, which stems from a shortage in new residential construction dating back to the aftermath of the 2008 financial crisis. The Ned Davis Research report estimates a current shortage of 2.1 million housing units in the United States—a shortfall that surpasses other major developed economies.

The report also addresses the "lock-in effect," a phenomenon observed in periods of low mortgage rates. Many homeowners have secured below-market mortgage rates over the past few years. The fear of facing higher monthly payments if they were to sell and lose their favorable rates is discouraging them from moving, thus contributing to the shortage of available homes.

While this scarcity negatively impacts existing home sales and affordability, it helps reduce the risk of an economic downturn by keeping household debt service ratios low. The lock-in effect is expected to diminish gradually as mortgage rates rise, allowing homeowners to consider selling their properties.

However, despite the significant presence of millennials in the housing market, homeownership remains highest among older age groups, particularly those aged 65 and above. The influence of baby boomers, who enjoyed favorable mortgage rates and wealth accumulation over the years, still plays a crucial role in the housing market's dynamics.

In conclusion, millennials' increasing household formations and their impact on housing demand are vital drivers in the housing market's current stability. While challenges such as rising mortgage rates persist, the limited supply of available homes and the lock-in effect are expected to sustain the market's resilience. The interplay between baby boomers and millennials will continue to shape supply and demand dynamics within the housing market for the foreseeable future.