Is Gen Z Taking Over the Housing Market?
NEW YORK, May 5, 2023 (Newswire.com) - Credello: A 2022 report by Redfin found that 30% of 25-year-olds were homeowners, a percentage higher than both millennials and Gen X-ers! How has Gen Z passed its predecessors with homeownership when they're earning less and dealing with the same competitive housing market?
How Gen Z is outpacing other generations in homeownership
1. They entered a better job market than Gen Y - Millennials have the unfortunate fact that most of them entered their professional lives during the Great Recession, making it more difficult for them to start saving for a house in their 20s, a common investing practice. Gen Z, however, came into a more bustling labor market post-COVID. A U.S. Bureau of Labor Statistics study found that over 24 million jobs were added to the US economy since April 2020, a rate higher than pre-pandemic levels.
2. They capitalized on historically low mortgage interest rates - Before the recession, rates were at all-time highs. As a result, many millennials were unable to qualify for mortgages because of how high the rates were. Gen Z, however, benefited from historically low interest rates that occurred during the pandemic, making it nearly effortless to get a mortgage for a home.
3. They've been willing to move to "less desirable" areas - Thanks to remote work, many Gen Z homebuyers are opting for metropolitan areas that have historically low costs of living, saving them money on their homes. This generation is more willing to be nomadic than Gen X and, to some extent, millennials. They have been able to capitalize on new initiatives that "less desirable" towns are offering digital nomads who move to their cities, including moving allowances, housing grants, and even cold, hard cash.
4. They're more flexible with their housing - Since most Gen Z-ers are still in the beginning phases of building their families, they're more willing to own homes that are smaller or non-traditional. The tiny home movement that began as a way for millennials to own homes has branched out to Gen Z and taught them that a three-bedroom/two-bath house isn't all it's cracked up to be when you're still young. Consequently, many are opting instead for the cheaper "starter" homes or even pre-fab or mobile homes since getting financing for a mobile home can sometimes be easier than traditional mortgages.
What older generations can learn from Gen Z
1. Be flexible - Many of the things that have held back older generations, such as not being willing to move to less desirable areas, can be overcome with a bit of creativity and flexibility. For example, many Gen Z-ers opt for "starter homes'' or pre-fabricated housing that is easier and cheaper to get financing for than traditional mortgages.
2. Cut your spending - Many Gen Z-ers watched their sibling millennials struggle in harsh economic climates, leaving many in debt and struggling. Because of this, many entering the job market now are much more cautious with their spending habits and are instead opting to squirrel money away for future purchases, like homeownership, instead of impulse buys.
3. Watch the market - There is rarely a "perfect" time to buy, but that doesn't mean you shouldn't hedge your bets by waiting for the market to fluctuate. Both interest rates and real estate markets will ebb and flow over time, so keep your eye on how things are trending in your area. Gen Z saw that the time to buy was during the historically low-interest rates of 2020 and struck while the iron was hot. Consequently, now interest rates are much higher to help curb inflation, and most real estate markets in the US are highly competitive, making it the wrong time to buy. Sit patiently and wait for the tide to change.
The bottom line
Looking at the data above, it's clear that Gen Z is taking over the housing market. They've taken advantage of historically low mortgage rates, are more flexible with their housing needs, and are more cautious with their spending habits. As a result, they can get mortgages easier than previous generations and aren't as affected by high interest rates.
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