Gen Z is proving that young Americans want to be homeowners and are willing to prioritize it.
According to new Redfin data, Gen Z is ahead of Millennials when it comes to homeownership, with 37% of Gen Z respondents already owning a home or planning to purchase one within the next five years.
Only 32% of Millennials said they have taken that step or plan to within the same time frame.
“The rising tide lifted Gen Z homebuyers in 2020 and 2021; they were part of the pandemic-driven homebuying frenzy,” said Redfin Chief Economist Daryl Fairweather.
Gen Z is more likely to prioritize homeownership as a financial goal, with 60% of Gen Z respondents citing it as a top priority compared to 52% of Millennials. In contrast, Millennials were more likely to prioritize paying off debt and building an emergency fund.
Both generations are struggling to save and build long-term wealth. Student loan debt was cited as a significant barrier by both groups, with 36% of Gen Z respondents and 40% of Millennials saying it was preventing them from saving for a down payment.
The high cost of homes was cited as a barrier by 63% of Gen Z respondents and 71% of Millennials.
Home price appreciation particularly affects younger homebuyers, who typically have lower incomes and less credit than older shoppers.
Fairweather noted that while some Zoomers were able to coast on a rising tide during the pandemic, Millennials ended up with the short stick.
“Millennials have been financially unlucky. Their parents had a more straightforward financial journey. The oldest millennials entered the workforce during the 2001 recession,” Fairweather said.
“Then came the 2008 financial crisis, with many millennials in their first post-college job. It limited their earnings, overall wealth, and ability to buy a home for many years afterward. Millennials started to gain homebuying momentum just before the pandemic, but they were once again dealt a bad hand with pandemic-related job losses in April 2020.”
Many Millennials entered their 30s, a prime homebuying age, during the housing boom of the last two years and face high competition from older, richer buyers and real estate investors.
When they do buy homes, they tend to spend more of their monthly income on costs than other generations and are at the greatest risk of becoming house-rich and cash-poor.
Despite these challenges, both generations are optimistic about their ability to achieve homeownership in the future. A majority (73%) of Gen Z respondents said they believed they would be able to buy a home within the next 10 years, while 62% of Millennials felt the same way.
Mortgage brokers can take advantage of popular short-form video platforms like TikTok to appeal to young Americans. Educational videos explaining the home buying process, especially focused on building finances and affordability issues, can engage potential buyers and help them feel confident as they search for their dream home.
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