Gen Z Surpasses Millennials and Gen X in Homeownership
A recent study conducted by Redfin has revealed that the Gen Z generation is outpacing both Millennials and Gen X when it comes to homeownership. However, while this younger generation shows promising progress, the current state of the housing market poses challenges that could lead to intergenerational inequality, particularly for those who have not purchased homes in the past three years due to skyrocketing prices and mortgage rates.
Surprisingly, adult Gen Zers are already surpassing their parents' homeownership rates at a similar age. In 2022, approximately 30% of 25-year-olds from Gen Z owned their own homes, slightly higher than the 28% of Millennials and 27% of Gen Xers who achieved homeownership at the same age. Nonetheless, Baby Boomers still hold the highest homeownership rate among these generations, with 32% of them owning homes by the time they were 25.
Although Gen Z is ahead of their parents' generation in homeownership, Millennials are still lagging behind. In 2022, 62% of 40-year-old Millennials owned homes, compared to the 69% homeownership rate among Baby Boomers at the same age.
The oldest members of Gen Z were fortunate to purchase homes during the housing boom of 2020 and 2021, whereas the oldest Millennials faced the challenges of the 2008 mortgage crisis when they reached age 25.
Gen Z homebuyers have been gravitating towards more affordable regions of the country, such as Virginia Beach, Virginia, and Cincinnati, Ohio. Conversely, Millennial buyers are more prominent in job centers like Seattle, Washington, and Philadelphia, Pennsylvania.
One of the key factors contributing to Gen Z's homeownership success is the historically low mortgage rates they were able to secure, averaging at 3.1% in 2021. Additionally, the tight labor market during the pandemic played a role in rapidly increasing their incomes, with wages rising by 12% in 2022—twice the average increase for the overall population, according to a report by Bloomberg.
Focused on Homebuying in Smaller Cities
Gen Z focused their homebuying efforts in smaller cities with more affordable housing options, making it easier to afford down payments.
For instance, Virginia Beach, the most popular location for Gen Z buyers in 2022, had a median home sale price of $225,000. On the other hand, Seattle, the top choice among Millennials, had an average house price of $775,000. This discrepancy can be attributed, in part, to the flexibility of younger individuals in choosing their locations as they enter the workforce in an era of remote and hybrid work. Older adults may be more tied to locations near their existing careers, as indicated by the study.
Financial Challenges for Millennials
Daryl Fairweather, Redfin's Chief Economist, pointed out the financial challenges faced by Millennials, stating, "Millennials have been financially unlucky. Their parents had a more straightforward financial journey. 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."
Overall, the rising homeownership rates among Gen Z indicate a positive trend for this generation and their financial well-being. According to a recent study by the Federal Reserve, the median net worth of U.S. homeowners is 40x higher than the median net worth of renters.
The rising homeownership rates among Generation Z highlight their proactive approach to entering the real estate market and securing their own homes. While Millennials and Gen X may face unique challenges, there is hope for a brighter future for all generations. As Nebraska Realty, a trusted real estate agency, we understand the diverse needs and aspirations of individuals across different age groups.
Whether you belong to Gen Z, Millennial, Gen X, or any other generation, our dedicated team is committed to serving your real estate needs in Nebraska and Iowa and helping you find the perfect home that aligns with your goals and dreams. Together, we can navigate the ever-changing housing landscape and create a more inclusive and prosperous future for all.