Gen Z Enters the Housing Market

Those born between 1997 and 2012, also known as Generation Z, are coming of age and considering purchasing their first home. Here's what they're facing...

With high interest rates, competitive cash offers and excess demand, it isn’t the ideal time for most people to buy a house. Those born between 1997 and 2012, also known as Generation Z, are now entering adulthood, and attempting to make waves in the housing market.

Here’s a look at what Gen Z faces in the path to homeownership:

  • The average price of a home in 2022 was $543,000, compared to $307,400 in 2013.
  • The interest rate on a 30-year fixed-rate mortgage has nearly doubled since 2013 (3.98% to 6%).
  • The oldest of Gen Z were looking for their first home during peak pandemic years (2020-21), which came with inventory shortages and skyrocketing prices.
  • Around 40% of homes are sold over asking price, and one-third of U.S. homebuyers are paying all cash (the highest share in nearly a decade).
  • The average age of first-time homebuyers in 2022 was 36 years old, the highest age on record.

With these conditions in mind, it isn’t hard to imagine why only 4% of homebuyers in 2022 were Gen Z. Of those recent homebuyers aged 18 to 23, almost half previously owned a home. Thirty-four percent of Gen Z believe that buying a home will always be out of their reach for financial reasons.

Read more to see how Gen Z compares to other generations, where they’re finding success and what their participation in home buying means for the housing market at large.

Generational Differences

Each generation has faced its own set of challenges and unique circumstances as they entered the housing market. While Gen Z made its debut during the pandemic, many millennials (currently 26 to 40-year-olds) experienced the 2008 housing market crash and ramifications of the recession. Even so, Gen Z is slightly ahead of its counterpart.

According to 2023 RedFin data, 30% of 25-year-olds owned their homes in 2022, compared to 28% of millennials when they were 25. Gen Z also came ahead of Gen Xers (born between 1965 and 1980). Baby Boomers (born between 1946 and 1964) had the highest rate of all (32% of whom owned homes at age 25).

At 40-years-old, 62% of millennials owned a home compared to 69% of Baby Boomers at that age. Only time will tell how Gen Z’s presence in the housing market will continue.

One more difference? Gen Z homebuyers are flocking to affordable cities, whereas millennials are heading toward larger job centers. Location matters, and certain parts of the country offer an easier path to homeownership.

Regional Opportunities

Gen Z, and many other prospective homebuyers, are faring much better in certain areas across the country.

In a recent report from LendingTree, Gen Z made up more than 20% of mortgage requests last year in regional, smaller-sized cities like Salt Lake City, Oklahoma City, Birmingham, Indianapolis, Cincinnati and Louisville. Less affordable metropolitan centers like San Francisco, New York City and Los Angeles aren’t popular destinations for Gen Zers looking to own – where they made up less than 10% of mortgage requests.

map of popular cities for Gen Z
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Adult Gen Zers account for about 15% of potential homebuyers across the nation’s largest cities now, but as they continue to age up and reach higher incomes, more opportunities will come.

The Future of the Housing Market

Gen Z is beginning to supersede millennials as the targeted, coming-of-age consumer group. Being digital natives, college-educated, socially aware, responsibly risk-averse, as well as the most racially and ethnically diverse generation in U.S. history – are all characteristics that generally describe this generation and shape their spending habits and preferences.

Even knowing how difficult it can be, the hope for one day owning a home is still there. Nearly 60% of Gen Z respondents in a recent survey associated owning a home with achieving the American Dream.

This generation is redefining the home buying process and shifting their sights on short term vs. long term goals. Perhaps initially sparked by the pandemic, Gen Z is trading in high rent prices for rent-free living back home. Opting to save money for now by moving back in with parents, they’ll take the leap when they’re ready.

When that time comes, they prefer to use technology to help them find the right home. Eighty-six percent of buyers in their twenties used a mobile phone or tablet through the process. According to a 2021 survey, 67% of Gen Z homebuyers would consider using an app or online service to make the purchase.

Regardless of how or when Gen Z finalizes the deal, it’s probably for the long haul – a new study reveals. Nearly 50% of Americans between the ages of 18 and 24 who bought homes in the last year plan to stay in them for 16 years or more.

It’s an unprecedented time for the housing market, and Gen Z might just be prepared to tackle it on their own terms.

No matter where you are in your life journey, or which generation you relate most to, Hilldrup is there to support all your moving and storage needs. Schedule a free quote today!