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Gen Z and the concept of home ownership

Gen Z and home ownership

Generation Z, born between 1997 and 2012, is emerging as the next major consumer group. However, as they enter young adulthood, they are encountering significant obstacles to achieving their dream of home ownership.

One of the primary challenges for Gen Z homebuyers is the current state of the housing market. Inventory shortages and soaring home prices have made it increasingly difficult to afford a home. As of August 2023, the national median home price exceeded $405,000, compared to around $310,000 three years prior. Additionally, interest rates on 30-year fixed-rate mortgages have surged from 3.38% to 7.8%, further impacting affordability.

Several major barriers are hindering Gen Z’s path to homeownership:

Down Payment: 

A significant 40% of non-homeowners in Bankrate’s Financial Security Survey have expressed an inability to save for a down payment and closing costs. Even with just a 3% down payment at the current median price, Gen Z buyers would need to save over $12,000, not including additional expenses like closing costs, moving fees, and home repairs.

Inflation: 

Gen Z, as they earn entry-level salaries, faces the challenge of higher living costs due to inflation. This phenomenon impacts essentials like groceries, gas, and rent. Inflation remained elevated as of August 2023, with potential for continuation into 2024.

Student Loan Debt: 

Both millennials and Gen Z have grappled with delayed life milestones, such as homeownership, due to the burden of student loan debt. This debt not only limits the ability to save for a down payment but also affects a borrower’s debt-to-income ratio, influencing borrowing capacity and rates.

Job Insecurity: 

Many in Gen Z are still establishing their careers, job-hopping, and pursuing raises. Job insecurity is a concern for 36% of them, according to Bankrate’s Job Seekers Survey, potentially impacting their decision to buy a home.

Gen Z’s approach to homebuying is influenced by these challenges. While homeownership remains an aspiration, it is less deeply ingrained in this generation compared to previous ones. To boost savings, many are choosing to live with family rather than renting. A notable 30% of Gen Z homebuyers move directly from their family homes to homes of their own. Additionally, 53% are engaged in side hustles to supplement their income and savings.

Key Gen Z homebuyer statistics

  • Gen Z makes up 4% of all homebuyers, according to the National Association of Realtors (NAR).
  • 63% of Gen Z respondents to Bankrate’s Financial Security Survey associated owning a home with the American Dream — less than the overall 73%.
  • Gen Z homebuyers purchase the smallest homes across buyers: a median 1,480 square feet, according to NAR.
  • Just 31% of Gen Z homeowners have no regrets about their home purchase, according to the Bankrate survey.
  • 13% of Gen Z respondents to a separate Financial Freedom Survey by Bankrate don’t feel financially secure, and likely won’t ever feel that way.
  • In terms of location, Gen Z homebuyers are gravitating towards markets with more affordable housing options. 

As is evident, Generation Z faces numerous hurdles in their pursuit of homeownership, including soaring home prices, inflation, student loan debt, and job insecurity. Their approach to addressing these challenges involves living with family, engaging in side hustles, and seeking affordable housing markets. These circumstances are reshaping the traditional path to homeownership for this emerging generation.

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