Generation Z and Home Buying
Most members of Gen Z – born between 1994 and 2005 and now 23 and younger – expect to own their first home by age 28 – three years younger than the median age of first-time homeowners; and another nearly 100,000 already own a home.
By contrast Gen Y – born between 1977 and 1994 – has made it pretty clear that they aren’t ready to take the homeownership plunge anytime soon. They aren’t quite ready to move out of their parents’ basement, and having a piece of the American Dream no longer seems to be a priority for them.
Gen Z, however, isn’t going to follow in those footsteps. According to recent research, Gen Z is actually on track to reverse the trend set by their predecessors. According to a survey by Better Homes and Gardens Real Estate in 2016, a whopping 82% of 13- to 17-year-olds said at the time that homeownership was the most important part of achieving the American Dream. And nearly every single teen surveyed (97%) believed they’d own a home in the future.
In fact, despite research suggesting that today’s teens make up the most entrepreneurial generation yet, 77% of survey respondents said they’d rather own a home than own a business, and 53% said they would give up social media or do twice as much homework every night for a year if it meant they could buy their own place.
When asked to estimate how much they’d pay for their home, most teens guessed about $274,000, which is almost exactly the median cost of a home today, according to the U.S. Census. (Still, more than half of teens said they think their parents will probably help them buy their first home.)
But they also have a lot of milestones they want to reach first: Most expect to earn an advanced college degree and/or get hitched prior to purchasing their property. Of course, it remains to be seen whether these teens’ home-buying aspirations are realistic.
But at least they’re thinking about their futures. If you’ve got an adolescent at home, give him a little insight into the world of real estate by having an open and honest discussion about what it takes to own a home and show them the online tools available so they can see how much it costs monthly to own a home and in the future.
Human interaction is key
Even though they will most likely begin their search online, in the 2016 survey, Gen Z-ers said they believed that it was important to have a real estate professional at their side.
The desire for human interaction in their purchasing decisions goes beyond homeownership and into their day-to-day shopping.
The panelists all agreed that they are much more likely to listen to endorsements and opinions from friends and family than online reviews. They said they need to be able to trust the source of recommendations, and Gen Z-ers tend to view online reviews as the opinions of strangers.
When it comes to social media, the top platforms used by the panelists are Instagram, Snapchat, Twitter and Tumblr, and they are frequently interacting with these platforms, but none of the panelists are regular users of Facebook.
Getting started early
A growing number of young Americans are taking the plunge for homeownership. More than 99,000 members of Generation Z have mortgages, according to the credit agency TransUnion TRU, -1.01% Their average mortgage balance: $140,000.
“I’m a little surprised to see the numbers as large as they are,” said Rob Dietz, chief economist and senior vice president for economics and housing policy for the National Association of Home Builders. “The traditional life cycle is to rent, especially for younger consumers who might have student loans.”
Buying into a strong housing market
It’s all the more impressive given the strong housing market. The existing home inventory is “tight,” Dietz said, and the cost of single-family homes is rising faster than incomes. Given those conditions, it’s possible even more members of Generation Z could own homes, but the prices might be too high at this moment, he said.
And just 1.2% of Generation Z mortgages are 60 or more days past due. That’s slightly less than the average of 1.6% for Gen Y millennials, 2.3% for members of Generation X – born between 1966 and 1976 – and 1.6% for Baby Boomers – born between 1946 and 1965.
Members of Generation Z seem to value home ownership – around 62% of the older members of Generation Z say owning a home is a key component of the American Dream — about the same number as the members of older generations.
This is, indeed, encouraging news for our future!