Generation Z is just entering the housing market, but their impact will be felt across the real estate industry. Why? Because they value owning a home. In fact, according to a Realtor.com Gen Z Survey, 72% of those surveyed plan on buying a home in the next five years. And, like the millennials, they found a prime opportunity to save for a down payment during COVID-19, when they were able to curb spending.
A Zillow survey of Gen Z (ages 18-26) and millennials (ages 27-40) showed that 83% saved money in at least one spending category during the pandemic. Almost three million have moved back home since spring 2020, according to Zillow. When asked what they plan to do with the cash, some 59% plan to use their savings for a down payment on a home.
Jonathon Aper, a Gen Z college grad who works in finance, recently purchased a home in North Texas. The pandemic lockdowns allowed them to save by cutting expenses like entertainment. Working from home meant lower gas bills, as well. Aper and his wife were looking for homes to meet the needs of an expanding family. They settled on a pre-owned home and planned to invest in renovating and reconditioning the house. Aper sympathizes with fellow Gen Zers and Millennials who are struggling to find a house in this market.
Rising prices make it challenging to find something affordable. “The best advice I can give to Gen Zers is to hang in there. You’re not going to get [the home with] your first offer. It usually doesn’t happen that way,” he said.
“Nowadays, houses are off the market so fast, your real estate agent [can’t] sit there and [say], ‘Hey, I’ve got these three houses for you to take a look at today. Let’s go ahead and plan a time.’ You have to do your research on realtor.com, Zillow, and reach out to your real estate agent and say, ‘Let’s look at this tonight!’ Otherwise, they’re going to be [gone]. The process is very fast.”
What’s holding them back?
According to the Realtor.com survey, the holdback for Gen Z to purchase a home is job stability. Nearly half of those surveyed are employed. Some 45% of Gen Zers are already saving to buy a home, and 75% did not leave their current living situations to save on rent. Another 17% of those who did move only saved money to put toward a down payment.
What’s the rush to buy a house, and what are the concerns that Gen Zers are facing?
- 50% want more room for growing families.
- 49% see themselves living in the suburbs, while 19% said they prefer the space.
- Half are concerned about the economy and job stability.
- 43% of those can’t afford desired neighborhoods
- 34% are still in college.
Rachel Stults, the deputy editor of Realtor.com, said affordability is the key for most Gen Zers. They want to know they can get a good home and build on it later.
“From exploring metros that offer both jobs and more affordable housing to saving for a down payment, Gen Z homebuyers know how crucial it is to have a financial leg up when it comes time to buy. If they can learn anything from the experience of the millennial generation before them, it’s the importance of laying the groundwork so that they can act quickly on a home in their budget. Prospective buyers should also plan for what they’ll do if mortgage rates increase or other housing market conditions change quickly, particularly coming out of the pandemic. In short, whether they plan to buy in two years or ten years, prospective Gen Z homeowners should be thinking several steps ahead.”
Who’s influencing decisions?
According to Zillow, when it comes to the decision-making process for purchasing a home, including the financial aspects and deciding on home features, most millennials and Gen Zers reported discussing their housing decisions with their parents (71%) and friends (61%). Half discussed their housing decisions with their siblings, while not quite a third (29%) discussed them with their grandparents. They were least likely to report discussing their housing decisions with their social media followers — only 16% reported doing so.
Among millennials and Gen Zers who already own a home or have tried to buy one, most reported that the opinion of a significant other (60%) or parent (54%) influenced them not to buy a particular home. A smaller number of those surveyed (38%) said the same about a friend’s opinion.
Zillow’s research forecasts that there will be 6.4 million more households formed by 2025 due to a huge wave of millennials now hitting their mid-to-late 30s, aging into their homebuying years. About a third (32%) of Gen Zers and millennials reported that some friends have already purchased a home.
For now, homebuying is a continuous struggle for Gen Z. It’s an unpredictable market that requires a balance of aggression and patience without overpaying for a home.