As Gen Z enters the housing market, young home shoppers say they face many barriers to homeownership, and 60% of zoomers worry they might never be able to afford a house.
A new survey from Clever Real Estate asked 1,000 members of Gen Z about their feelings toward homeownership. Clever found that zoomers experience widespread anxiety balanced against an urgency to buy into the market before home prices rise even further.
Gen Z is struggling financially
Forget buying a home, many zoomers have trouble covering basic living expenses. More than half who don’t own a home admit they struggle just to pay rent.
Inflating living costs make it tough to save for a down payment, which is traditionally the first hurdle in the homebuying process. Twenty-nine percent of zoomers say saving for a down payment is a challenge, and 28% think their savings won’t be enough.
Some zoomers’ financial struggles are due to a cooling labor market, as recent graduates struggle to find high-paying jobs. About 27% of zoomers say a lack of stable employment keeps them from homeownership. Even those with jobs report not doing well; one-fourth of employed zoomers cite entry-level salaries as significant barriers to homeownership.
Many Americans’ wages haven’t kept pace with inflation. Half of zoomers said out-of-reach home prices complicate their homeownership bids, and 31% say high interest rates block their efforts.
“Typical financial barriers for Gen Z buyers are high student loan debt, limited credit history, and the challenge of saving for a down payment while dealing with rising living costs,” says Philadelphia-based real estate agent Brett Rosenthal.
Despite Rosenthal’s positive experiences working with Gen Z buyers, he advises young Americans facing budget crunches to look into first-time homebuyer programs or ask family members for assistance.
Despite factors stacked against them, more Gen Zers buy homes than millennials did at their age.
Unrealistic expectations
About one in five zoomers expect their first home to cost at least $450,000, just $30,000 more than the median U.S. home price of $420,000.
Nearly one in three zoomers think they’ll someday own a home worth more than $1 million. That percentage rises to 43% among Gen Zers who don’t own homes, suggesting unrealistic expectations might result from housing market unfamiliarity.
Zoomers anticipate owning modern, high-tech homes. Forty percent said they expect their first home to have an alarm system, and 29% expect advanced smart-home technology. About 22% refuse to live in a house without a swimming pool, 15% demand a home theater, and 12% require an on-grounds guesthouse.
Many agents think Gen Z buyers haven’t adjusted to the new market.
“The years slightly before, during, and after COVID caused some Gen Z buyers to have unrealistic expectations,” Rosenthal said. “When rates were super low, these buyers got accustomed to it. Now that [interest rates] have normalized, they are a little unrealistic.”
High expectations starkly contrast the average zoomer’s finances. Sixty-one percent of Gen Z respondents admit they’ve put away less than $10,000 for a down payment, and 17% have no savings.
Ten grand as a 20% down payment would secure Gen Zers a home worth $50,000. Even those putting down that same amount as a modest 10% down payment could buy a $100,000 property. Yet only 13% of zoomers plan on purchasing homes in that price range.
This market disconnect sets them up for disappointment. Indeed, 65% say their home doesn’t have every desired amenity.
Not all zoomers have unrealistic budgets; more than half of young buyers anticipate buying modest starter homes valued below $250,000.
Money from parents
Many zoomer homebuyers had help from mom and dad. One-third say their parents helped with their down payment, and 31% said they moved in with their parents to save money.
Still, one in three Gen Z homeowners said they’ve struggled to pay their mortgage, and one in eight regret accepting pricy mortgages.
Zoomers regret buying a home
More than two-thirds of Gen Z homeowners have home purchase regrets, the most common being a lack of homebuying knowledge. More than one-fifth of zoomers (21%) confess they didn’t sufficiently understand what they were getting into.
Roughly one in seven Gen Z homeowners say they applied subpar homebuying information from TikTok and other social media platforms, pointing out the importance of financial literacy.
Zoomers say utility bills, property taxes, and moving costs compound the already-expensive homebuying process. Nearly four in five Gen Z homeowners (79%) feel their generation cannot afford homeownership.
Some zoomers say homeownership has other drawbacks besides cost. Approximately 38% of Gen Z homeowners say they’re the youngest of their neighbors, and 13% wish more young people lived nearby.
This article was produced by Media Decision and syndicated by Wealth of Geeks.