Millennials aren't as rich as they were a year ago. Here's why.

• The average millennial's net worth grew from $64,000 to $111,000 between the first quarter of 2020 and 2022.
• But inflation and other factors caused their net worth to dip last year.

Millennials' wealth levels have taken a wild ride over the last three years.

That's according to updated data provided to Insider by the personal finance site MagnifyMoney, based on an analysis of Federal Reserve distributional financial accounts and Census Bureau population data.

As of the first quarter of 2020, MagnifyMoney estimated, the average net worth of a millennial — those born between 1981 and 1996 — was roughly $64,000. But just two years later, as of the first quarter of 2022, the average millennials' net worth surged to $111,000.

However, wealth accumulation stalled out after that. As of the fourth quarter of last year — the most recent measure – millennials' average net worth had fallen to roughly $106,000.

These fluctuations have real economic ramifications for millennials. They impact not only their ability to meet expenses today, but whether they will be able to afford a home, retire at a reasonable age, and live the lifestyles they desire in the years ahead.

Which factors have driven these changes in net worth? And what are the key factors that could impact millennials' wealth trajectory in the years to come? Insider spoke with two experts to explore these questions.

Millennials' wealth boom was driven by a spike in homeownership and pandemic savings

The pandemic era was a difficult time for many Americans, but many millennials saw their net worth's grow considerably, Matt Schulz, chief credit analyst at Lending Tree, the parent company of MagnifyMoney and an online lending platform, told Insider.

"Even as general life got really, really chaotic in the depths of the pandemic, a lot of people ended up finding themselves doing pretty well financially if they were lucky enough to avoid being part of the massive spikes of unemployment that we saw," he said.

Aided by US government stimulus measures, the moratorium on student loan payments, historically low interest rates, side hustles, and a pullback in spending tied to US lockdown measures, many millennials were able to save, invest, pay down credit card debt, and buy a home — all factors that contributed to growing wealth.

"It takes money to make money, said Schulz, adding, "they had more money available to put to work for them than they had ever had before, and they did so, and their net worth grew accordingly."

Lowell Ricketts, a data scientist for the St. Louis Fed, attributed the growth in millennials' net worth to the expansive government fiscal measures and increased millennial homeownership rates before or during the pandemic era's home price spike.

"I think the broad-based response helped households quite a bit," he told Insider. "Millennials, by this time, had entered homeownership in large numbers, as is typical of the life cycle. For those that did have real estate assets, housing markets did phenomenally well."

2022 was a "mess" and took a bite out of millennials' wealth gains

Millennials' wealth creation boom cooled off last year, which Schulz attributed to a variety of factors.

"2022 was just a mess," he said. "Inflation really took hold, gas prices spiked like crazy that summer, the Fed began raising rates at every opportunity, stock market fell, the housing market cooled off as mortgage rates rose, vehicle prices spiked like crazy, credit card debt hit record highs.

"It just all added up to a time where a whole lot of people's net worth suffered. Not just millennials, but an awful lot of Americans."

According to Ricketts, millennials' net worth has "plateaued" — rather than notably declined — over the past year. While he attributed this in part to inflation, he said the declines in housing and investment assets from their peaks have been more significant drivers of this.

2 factors that could shape the future of millennial wealth

Going forward, the resumption of federal student loan payments in October will hamper the wealth generation of some millennials. But the bigger concern, Schulz said, is that the rise in interest rates and persistence of high housing prices will prevent a large group of millennials from buying a home.

"As long as those mortgage rates stay as high as they are, it's going to make what was already a challenging housing market for millennials and Gen Z just that much more difficult," he said.

"Real estate has historically been such a big contributor to people's net worth. If they are never able to jump in that pool, it can put a bit of a lower ceiling on their overall net worth."

Ricketts, however, said that one dynamic — the persistence of a worker shortage in the US — could potentially give millennials a financial boost in the years ahead.

"With the wave of retirees, with more subdued immigration during the pandemic, millennials might have some more bargaining chips when it comes to the labor market, and therein lies the ability to potentially gain more take home pay and then potentially invest that," he said.