T
he Generation Z conundrum: a sea of savings, yet a dearth of homeowners. With 68 million Gen Zers in America, born between 1997 and 2012, nearly half aspire to own a home by 2029. However, their financial prowess doesn't seem to be translating into homeownership.
Gen Z's saving habits are indeed impressive, with 21% setting aside 1-10% of their income each month, while 25% save between 11-20%. A staggering 12% manage to save 21-30%, and an enviable 5% save their entire paycheck. This outpaces the savings of boomers, Gen X, and millennials.
Yet, despite their financial discipline, Gen Z's homeownership rate remains low. In fact, they comprise just 3% of buyers and 2% of sellers in the National Association of Realtors' Home Buyers and Sellers Generational Trends Report. This is largely due to their entry-level income status, with an average annual income of $45,000.
Gen Z's financial challenges are further exacerbated by high homeownership costs relative to their income. In the 200 largest metro areas, Gen Z buyers allocate 37% of their income toward their mortgage, compared to the average buyer's 26%. This means they must stretch their budgets further to afford homeownership.
The job market and economy also play a significant role in Gen Z's decision to rent rather than own. With side hustles becoming increasingly essential, many Gen Zers are juggling multiple jobs, with 5.3% of U.S. workers doing so by the end of last year – the highest rate since 2019.
Despite these challenges, some cities are attracting Gen Z homebuyers. Akron, Ohio, for instance, is a Midwestern city that's becoming a hotspot for first-time buyers. Real estate agent Ali Whitley notes, "Gen Z are becoming first-time homebuyers here. It's a great time to buy in a great area for an affordable price."
In 2024, 13% of home purchase applications came from Gen Z, marking a 3-point rise from the previous year. While many Gen Z homebuyers are purchasing solo, around 45% of applications included co-applicants – friends or parents offering their support.
The down payment conundrum also affects Gen Z homebuyers. Conventional loans typically require 20% down, but real estate agent Denise Supplee notes that she's seeing down payments as low as 5-10% for first-time buyers. The national median list price is $400,500, and using a mortgage calculator, an 8% down payment would result in a monthly payment of $2,413 – excluding taxes and insurance.
As Gen Z navigates the complex world of homeownership, they're facing unprecedented challenges. With interest rates high, housing inventory low, and home prices rising, many are wondering if they'll be forced to rent forever. A recent Insurify poll found that 13% of Gen Zers who want to own a home believe they'll never be able to afford it.
However, some Gen Zers are getting creative with alternative solutions like co-owning homes with friends or exploring more affordable cities. As the housing market continues to evolve, one thing is clear: Gen Z's homeownership journey will be shaped by their unique financial realities and innovative approaches to achieving their dreams.
