The Generation Z Real Estate Experience

Gen Z Americans — alongside the millennials, both generations born digitally are impacting the market for real estate.

A recent Redfin study found that there were greater numbers of Gen Z homeowners than Gen X and millennial Americans of the same age. In fact, the Redfin report showed that the Zoomers are over their parent's homeownership rates, with 30% of those aged 25 and over owning homes in 2022, which is higher than the 27% average for Gen Xers who were at the same age.

"Millennials Generation Zers" are living in homes longer, getting married later, and having kids later than before. They are going through the same period that the previous generations were living in their "starter" houses," said Dottie Herman, Vice Chair and former chief executive officer of Douglas Elliman Real Estate.

Given the current rates, Herman said other investors might have purchased at record-low rates, so they don't plan to move anytime soon.

In contrast, she said the young homeowners in this scenario could make a few home modifications — or add-ons to the house they've already purchased but are generally looking to stay in their current home.

"There is a trend of increasing hybrid remote working, which means that workers do not need to travel as far. In the end, they are settling into more permanent houses and where they can live for longer periods," she said.

Are there any more "Starter Homes? Do you want to know if there are more "Starter Homes"?

If mortgage rates are very high, it is more difficult to accumulate equity that can be used to trade up. This is why it's quite rational that the members of Gen Z are considering the possibility of homeownership as a long-term endeavor, according to Danielle Hale, the chief economist at Realtor.com.

Hale stated that Realtor.com's analysis shows that with a mortgage rate of 3, it will take under five years before you pay down 10 percent of the amount owed on a loan. But it takes six years to hit this level when you have a mortgage at a 5% rate. It's nearly nine years since the rate is 8.8%.

"Amid uncertain times, investing in a house that one could remain in for the medium to long term makes logic," She said.

However, as she said, life might not turn out as expected. Career and family changes are normal for younger people and may cause plans and needs for housing to change.

Zoomers are snatching houses from Regional Cities

The younger generation is more likely to work remotely. Consequently, they're settling for smaller cities that offer an improved quality of life, better value for their money, and a more balanced life, according to Herman.

"Medium-sized cities have everything that Gen Z homebuyers are seeking and could be better suited for their lifestyles," she said.

As Hale stated, even as prices for buying have increased in recent years, a Realtor.com Rental Report found that the monthly cost of purchasing the typical start-up house in Memphis, Pittsburgh, and Birmingham was less than renting a comparable house.

"For Gen-Zers seeking immediate financial benefits, purchasing in low-cost markets can result in a rapid profit over other options like leasing," she said.

Other Gen Z Real Estate Trends

Based on Charles Williams, CEO of behavioral data company Percy, Gen Z is taking a waiting-and-see approach to home purchases because they're young and not hurrying to buy.

"Mortgage lenders are just getting ready to offer mortgage products to this significant age group," said Williams.

Another reason is that people with a Zoomer's license are most likely to relocate with their parents or be interested in this arrangement to see ownership become an actual possibility, as per the latest Realtor.com survey.

"With Gen Zers being more inclined to marry than previous generations, yet still keen on the idea of homeownership (72 percent would like to own a home one day), they are beginning to get inventive in how they can approach the increasingly costly housing market,", Hale said. Hale.

What do all of the Things mentioned above impact on the Housing Market?

According to Williams, the baby boomers remain in their homes and will likely stay in the foreseeable future. As a result, Gen Z will look for newly constructed homes that require time to get to market.

"Homebuilders are working as fast in the right direction, yet they must keep on their toes that macroeconomic factors affect the business... because of the high costs of building materials and fewer workers to work," he said. "For most Gen Zers, purchasing an apartment will be unattainable in 2024."

Matt Dunbar, SVP of Southeast Region at Churchill Mortgage Matt Dunbar, SVP of Southeast Region at Churchill Mortgage, also said that the trends in housing in Gen Z are not in isolation. They create ripples in the real estate industry that affect both the economics and aspirations of others.

For instance, the expert stated that the increasing demand for Gen Z in regional cities may inadvertently raise property prices and erode the affordability that initially brought Gen Z to these cities.

"This could render cities more financially unattainable for future generations," added Dunbar.

He also said that the overall economic environment, characterized by increased homeownership costs, the rising interest rate, and the return of student loan repayments, is casting a shadow on the homeownership aspirations of Gen Z and all generations.

"As the housing market continues to change in response to these myriad factors, it's important to understand that while every generation will have its own issues and needs, the larger economic conditions affect all." said the economist.