As the new decade gets underway, the youngest of the young adults – Generation Z – is entering the housing market with a significantly more positive outlook on homeownership than their Millennial or Generation X cohorts.
According to a recent survey by Freddie Mac, 86% of Americans born between 1997 and 2007 say they want to own a home someday – and estimate they will achieve that goal by the age of 30. Conducted in the summer of 2019, the survey received 1,531 responses from Americans now aged 14 to 23.
An overwhelming majority of Generation Z believes owning a home is a sign of success – a source of pride and financial security. Only 19 percent of respondents saw renting as more appealing than buying, compared with 30 percent of Millennials surveyed at the same age.
While the last decade has been remarkable period of sustained economic growth and prosperity, Generation Z is not too young to remember the Great Recession, when many of their own parents and grandparents faced foreclosures, short sales, and other housing difficulties.
Generation Z reflects the times in which they have lived. In general, they are more financially educated and aware than previous generations, and they appear to have a clear understanding of the benefits and challenges of home ownership.
While they aspire to homeownership, they are realistic about potential barriers, battling an unprecedented amount of student loan debt, tougher lending standards, higher home prices and limited inventory, particularly in lower price points.
Gen Zers told Freddie Mac that saving for a down payment is the biggest barrier to achieving homeownership. A comeback in starter homes would create a better chance at homeownership.
That could be on the horizon. Economists at Capital Economics anticipate a rise in new homes sold for under $300,000, from under 50% currently to about 55% by the end of 2020.
Source: Rick Civello