The Future of Homebuying: Does Gen Z Have It Even Tougher Than Millennials?

Full length rear view shot of young couple carrying cardboard box at new home.
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Buying a home is no easy feat, but it’s grown substantially harder for younger generations of Americans. According to recent Census data, the homeownership rate for millennials stands at 48.6% — over 20 percentage points below Gen X and nearly 30 below baby boomers. 

Even among 40-year-old millennials, the homeownership rate (60%) lags behind older generations at that same age. Apartment List reports that 64% percent of Xers, 68% of boomers and 73% of the Silent Generation owned homes at 40.

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It’s an alarming trend: Each new generation is experiencing less homeownership than the last. Now, Gen Z (born 1997-2012) is the newest to contend with a hot and pricey real estate market. 

“Gen Z is experiencing an unforgiving rental market which is putting additional pressure on them to buy. At the same time, interest rates are rising and pushing the boundaries of affordability,” said Scott Harris, licensed associate real estate broker at Brown Harris Stevens.

Aside from rising interest rates, housing prices have inflated at a breakneck pace, delaying homeownership for many in their 20s and 30s, especially in cities. 

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To get a better picture, GOBankingRates asked experts about both current and future real estate prospects for Gen Z. Does this new generation have it even tougher than millennials when it comes to homebuying?

Historically, Older Millennials Faced Higher Housing Prices

Today’s market is not a friendly one for homebuyers. However, it’s still friendlier than the market right before the Great Recession.

“Although today’s market may ‘feel’ bad, when compared to historical time periods like 2006 when mortgage rates were much higher, it’s not as bad,” said Greg Phillips, chief technology officer at Houwzer.

“In 2006, the oldest millennials were 25, the same age as the oldest Gen Zers are now. Looking at home prices in Fairfax, Virginia, in April 2022 versus April 2006 and adjusting for inflation, the same reference home in Fairfax would have been 18.7% more expensive in 2006. [It would also come] with a 32% higher monthly payment.” 

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But Most Experts Agree Gen Z Has It Tougher Now

Millennials have been subject to very wild fluctuations in the real estate market and the larger economy. Still, their financial lives have stabilized over the years. Let’s face it: The oldest millennials are in their 40s and many of them have decades of money management experience

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“Millennials simply have had more time [than Gen Z] to build their career, earn larger salaries, pay down student loan debt and save for a home,” said Stephen Riddell, head of sales at Better.

Like any generation, Gen Z also has their own special mix of challenges that affect their ability to save for homeownership. This includes fallout from the COVID-19 pandemic, where formative education and career opportunities may have been delayed years or even upended entirely.

Some Real Estate Woes Remain the Same, but New Ones Are Emerging, Too

“Most of the trends that contributed to millennials’ struggles finding homes still apply today for Gen Z house hunters,” said Martin Orefice, CEO of Rent To Own Labs

“College education is expensive and the debt that comes from it is a burden. Rent is high, making it hard to save for a down payment. Property values are incredibly high, too, and wages are all fairly stagnant, especially when you control for inflation.”

While Orefice outlines the same roadblocks many other experts point to, he adds that there’s another, more insidious reason young Americans can’t get into the market.

“The big factor that is accelerating all of these trends is the rise of real estate investors buying up every starter home they can get to serve as rental properties. These are exactly the kinds of homes that Gen Z should be aiming for, and they’re the hardest segment of the housing market to get into. If they could afford the suburban McMansions that their parents and grandparents built, they would have plenty of options,” he said.

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Gen Z’s Future in Real Estate Is Uncertain

Some experts say Gen Z will follow the trend of declining homeownership rates. Others think the housing market will cool off enough to give Zers a better chance.

“I’d be very wary of anyone who tells you they can predict the future market with any confidence, but the factors that drive the market are at least a constant. Any generation’s ability to own a home ultimately comes down to whether they can afford a down payment plus closing costs, qualify for a mortgage and handle the responsibility and costs that come along with owning a home,” said Scott Krinsky, partner at Romer Debbas, LLP.

Krinsky believes Gen Z’s future in homeownership depends on how strongly they value it. With the rise in remote work and lifestyle flexibility, Gen Z may place more value on financial and locational freedom than on shelling out the cash to own a home. 

However, this shift in values doesn’t mean Gen Zers don’t want to own homes. If anything, it’s a sign of the times — young people know they can’t afford homes, so they’re not structuring their lives with homeownership in mind.

Allyson Waddell, agent success manager and content producer at RealtyHop, falls into this category.

“I was old enough to understand the gravity of the 2008 crash and witnessed the direct toll that had on my family,” she said. “From a young age, I learned that the housing market was fragile, nothing was certain and that my journey to homeownership would likely be a long one.

“While the idea of owning property is appealing, I’ve also been turned off by its mysticality and understand that I may never own a home. For that reason, I believe Gen Z is ‘better off’ than millennials, as it seems their age group was fed the false promise of housing and now must come to terms with their reality. My generation has known our less-than-ideal fate since we were preteens.”

If Gen Z Aspires To Own Homes, They Need To Start Now

For those in Gen Z who do want to own homes, it’s an uphill battle, but still possible for many.

“Wannabe homebuyers of Gen Z need to inform themselves,” said Chuck Vander Stelt, real estate agent and founder of Quadwalls.com

“Start learning from a real estate professional about what it takes to buy a home. Keep your credit score up, keep your debt-to-income ratio low and save some money for a down payment. And no, you do not need a 20% down payment to buy a home! Boy, do I wish that myth would die out.”

Vander Stelt warns against having high expectations, especially for first-time homebuyers.

“I have heard many homebuyers in their mid-20s say they are looking for their forever home. What?! No, you’re not. Maintain a realistic expectation about your station in life currently and in the near future. Buy a home that you can afford and accept the idea you will trade up in the future,” he said.

If all else fails, consider investing in a lower-cost alternative, such as a tiny house, fixer-upper or manufactured home.

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About the Author

Levi joined GOBankingRates in 2019. He's found success in financial, political and military lifestyle writing, with work appearing on MSN, Yahoo Finance, OurMilitary.com and more. With a background in narrative writing, he enjoys turning interesting conversations into impactful content.

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