Millennial homeownership is on the rise — but student loan debt is still keeping millions of members of America's largest generation from owning a home.

Why it matters: Buying a house remains the No. 1 way to build wealth in the U.S.

What's happening: Due to their sheer numbers, millennials are the largest group buying homes right now, but their rate of homeownership lags behind previous generations.

• The homeownership rate among people under 35 is around 37%, per U.S. Census data. That's up from around 34% in 2016, but still relatively low, says Jessica Lautz, vice president of demographics and behavioral insights at the National Association of Realtors.
• For instance, when Gen Xers were roughly the same age as millennials are today — in the early 2000s — their homeownership rate hovered close to 42%.
• And when baby boomers were in their early 30s in the 1980s, their rate was around 40%.

"Affordability and inventory play a role," Lautz says. Housing prices are rising faster than incomes, "but student loan debt is an enormous factor."

36% of U.S. millennials say their student debt is a major barrier to saving for a down payment, according to a new report from the asset management firm Legal & General.

• And while 45% say saving for a down payment is their top priority, 26% say they first want to pay off student debt, and another 12% say their top concern is paying off medical debt.
• Sky-high rents are also preventing younger people from saving for a home, notes Lautz.

A bit of a pandemic silver lining: Interest rates on federal student loans — which account for some 93% of student debt — were set at 0%.

• On top of that, many young people moved back in with family and saved extra money.
• As a result, 38% of millennials surveyed by the National Association of Realtors said the pandemic helped them make a dent in paying down their student debt.

What to watch: Pandemic-era student loan relief may drive up rates of homeownership among millennials, Lautz says.

Editor's note: This story was first published on Jan. 20.