TOPLINE
The Gen Z generation is tracking ahead of Millennials and Gen X for homeownership, a new Redfin study shows—but the housing market threatens to create inequality across generations as those who didn’t buy homes in the past three years now face elevated prices and mortgage rates.
KEY FACTS
Roughly 30% of 25-year-olds in 2022—the oldest of the Gen Z (born between 1997 to 2013)—owned their home in 2022, a slightly higher percentage than the 28% of Millennials (born between 1981 to 1996) who owned homes at that age and the 27% of Gen Xers (born between 1965 and 1980)—but lower than the rate for Baby Boomers (born between 1946 and 1964), 32% of whom owned homes at age 25.
While Gen Z is ahead of their parents’ generation, Millennials are still tracking behind—62% of 40-year-old Millennials owned a home in 2022 compared with the 69% homeownership rate for Baby Boomers at that age.
The oldest of Gen Z were buying houses during the purchasing boom in 2020 and 2021, while the oldest Millennials reached age 25 right around the 2008 mortgage crisis.
Gen Z homebuyers have been flocking more toward affordable parts of the country, like Virginia Beach, Virginia, and Cincinnati, while Millennial buyers are more prevalent in job centers like Seattle and Philadelphia.
KEY BACKGROUND
Many from Gen Z took advantage of the 3% mortgage rates in 2020 and 2021 to become homeowners, with the average mortgage rate for homebuyers under 25 in 2021 at 3.1%. A tight labor market during the pandemic also helped that generation build their incomes quickly, as wages rose 12% in 2022, double the increase for the overall population, according to a Bloomberg report. Gen Z also focused its homebuying in smaller cities where housing was much less expensive, making it easier to afford a mortgage down payment. For example, Virginia Beach, which was the most popular location for Gen Z buyers in 2022, has a median home sale price of $225,000, while Seattle, the most popular among Millennials, averages $775,000 for a house. This is partly because people under 25 may be more flexible about their location as they enter the workforce in the era of remote and hybrid work, while older adults may be more tied to locations near existing careers, according to the study.
CRUCIAL QUOTE
“Millennials have been financially unlucky. Their parents had a more straightforward financial journey,” said Redfin Chief Economist Daryl Fairweather. “The oldest millennials entered the workforce during the 2001 recession. Then came the 2008 financial crisis, with many millennials in their first post-college job.”
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WHAT TO WATCH FOR
Now that mortgage rates have risen sharply from their pandemic lows, there’s a likelihood those who do not own their homes may have a harder time finding an affordable mortgage, the study shows. The “mortgage Millennials” or Gen Z members who bought homes before prices shot up more than 30% during the pandemic, or when mortgage rates were around 3%, have the upper hand over those who did not buy during that time and now face record-high monthly mortgage payments and rising housing costs.
FURTHER READING
U.S. Millennials: Home Ownership And The Growing Chasm Between Aspiration And Reality (Forbes)
Gen Z is coming for the housing market (Insider)
Compare Current Mortgage Rates (Forbes)