There’s a new generation turning 25 and they’re prioritizing home ownership sooner than ever. The oldest members of Gen Z, defined as the generation born roughly between 1997 and 2012, are the newest segment of buyers in the housing market. Although they only make up 2% of home buyers right now, Gen Z comprises 25% of the U.S. population, greater than millennials, Gen Xers, or baby boomers. Let’s take a closer look at the habits and views of this young population and what kind of real estate consumers they will be.
Belief in Home Ownership as a Path to Wealth
According to a Homes.com survey, nearly 86% of Gen Zers aspire to buy a home by the time they’re 35. But 48.1% of them want to purchase even sooner, between the ages of 25 and 30. That’s a stark contrast to millennials, of whom only 35.4% have managed to purchase a home by age 35. Stagnant wages, high student loan debt, and rising home prices have been big obstacles.
Gen Z is a savvy, highly educated generation that is paying attention to financial security at an earlier age. In fact, 68% of them see home ownership as a path to personal wealth. They see the benefit of investments when starting young and they tend to be more risk-adverse when it comes to debt. Those who are ready for a mortgage seek complete online transparency from lenders.
The Frugal, Money Saving Generation
About 7 million Gen Zers are employed full-time, generating $229 billion annually. 85% of those surveyed said they are saving up to 32% of their take-home pay. Over 75% put their money in savings accounts, 26% invest in the stock market, and 14% are saving for retirement.
But the other side of the coin is that Gen Z is on the lower end of the pay scale and at least a third of these adults still live in (or have returned to) their parents’ home. They see living at home as a longer-term solution to saving money. Those who rent or have a mortgage spend at least 50% of their income on housing. That’s far above the 20% that financial advisors have long recommended. And Gen Zers are currently graduating from college with an average of $37,000 in student loan debt. While graduates face a healthy labor market, it is also one where salaries are not keeping pace with the cost of living.
Their financial habits tend toward the frugal rather than the excessive. They have no problem buying refurbished technology and other second-hand items. This attitude is apparent in their home buying right now as they opt for affordable, functional homes—even fixer uppers.
The Tech-User Consumer
Gen Z has grown up never knowing life without the internet. They have lived through an unprecedented amount of technology advancement. Smart phones, tablets, and other tech devices are critical to their daily lives. They are also more educated and culturally diverse than generations before them. These are typical habits of this generation that could shape what type of real estate buyers they will become:
∙ They prefer brands to target them on social media rather than email or traditional advertisements.
∙ Smart phones are their go-to device to research products before buying anything.
∙ At least half of them are deal-seekers, often ensuring they don’t pay more than they have to. They use their phones to shop for a better price while they’re shopping in a retail store.
∙ They grew up with HGTV and YouTube do-it-yourself videos. These influences have shaped the desires of Gen Z to buy a home in order to creatively customize their own space.
∙ They see themselves living a suburban lifestyle and 83% want to live somewhere other than where they grew up.
Open to Alternative Home Buying
In order to achieve their goal of home ownership, Gen Z is more likely than older generations to consider less traditional homes. This includes buying a fixer upper, a tiny home, or house hacking. House hacking involves purchasing a multi-unit home with friends or family and renting out additional units for income or to cover the mortgage.
The bottom line is that Gen Z seems to recognize the importance of saving money sooner to secure their financial future. But like millennials, they are affected by heavy student loan debt and the rising cost of homes and interest rates. While it remains to be seen what percent of Gen Z will own a home by age 30 to 35, it certainly appears that this generation is very motivated to make it happen.
Statistical Source: National Mortgage News
Real Estate Term of the Week
Gen Z: A term used to describe a generation of people born approximately between 1997 and 2012. They are the generation following millennials.