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Gen Z and homebuying

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Generation Z is quickly superseding millennials as the next crop of consumers. Born between 1997 and 2012, this group is beginning to hit the marker that makes them old enough to vote, go to college and move out of childhood bedrooms and into homes of their own.

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Gen Z homebuying statistics
  • Gen Z currently makes up just 2 percent of the homebuying and selling market, according to the National Association of Realtors (NAR).
  • Close to 60 percent of Gen Z respondents to a March 2022 Bankrate survey associated owning a home with achieving the American Dream. In that same survey, only 9 percent of Gen Z respondents reported never wanting to own a home.
  • Forty-three percent of Gen Z respondents to a June 2021 Radian survey plan to buy a home within the next five years.
  • More than half (56 percent) of Gen Z respondents to an October 2021 Apartment List survey anticipate getting down payment help from family.
  • The typical age of a first-time homebuyer is 33 years old, according to NAR. The oldest members of Gen Z are now 25 years old.

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Gen Z homeownership: Obstacles and opportunity

Rather than continue to rent during work-from-home lockdowns, many in the Gen Z cohort retreated to a family home. In fact, more than 80 percent of adults who moved in with a parent or grandparent during the initial COVID wave were part of Gen Z, according to an analysis by Zillow — a trend that plenty of millennials also followed.

The pandemic wasn’t the only problem for Gen Z, though. For those who’ve recently graduated, student loans continue to strain finances. Seventy-four percent of Gen Z respondents to a March 2022 Bankrate survey reported delaying financial decisions, including buying a home, due to student loan debt.

As home prices skyrocket and mortgage rates start to climb, prospective Gen Z homebuyers are now grappling with saving more for a down payment while paying escalating rent prices. In 2017 — when some of these buyers were just finishing high school — the median sale price of a home in the U.S. was $313,000. Now, it’s $428,700.

Let’s not forget inflation and the broader potential storm clouds for a recession that could create another set of headaches for this generation, as well. With these headwinds, it’s easy to see why Gen Z might not be rushing to get a mortgage, despite many having a desire to become a homeowner.

When the time does come to buy, however, Gen Z is likely to put their tech savvy to use. Sixty-seven percent of Gen Z homebuyers would consider using an app or an online service to make their purchase, according to a June 2021 Homie survey. That doesn’t mean that Gen Z won’t also employ traditional avenues like working with a real estate agent, but it does mean they’ll be looking for convenience — think all-digital mortgage applications, e-closings and more.

Top Gen Z housing markets

Gen Z has a lot to contend with as first-time homebuyers. Their best bet might be in one of these top cities for first-time homebuyers in 2022, ranked by Bankrate:

  1. Pittsburgh, Pennsylvania
  2. Minneapolis, Minnesota
  3. Cincinnati, Ohio
  4. Kansas City
  5. Buffalo, New York

Tips for Gen Z homebuyers

1. Don’t feel pressured

While you might be anxious to get into a home now, the insane price run-up during the pandemic can’t continue forever.

“Waiting to buy may be a prudent course,” says Greg McBride, CFA, chief financial analyst for Bankrate. “For young upwardly-mobile professionals, your earnings over the next few years may grow into home prices. With the recent surge in price appreciation, we may see home prices stagnate for a few years. If that happens, would-be buyers have an opportunity for their earnings and cash flow to catch up.”

2. Consider your debt load

If you have student loan debt, you might be hesitant to take on more with a mortgage. Tackling that first might in fact be the better course.

“You may be better off spending a few years knocking out some of that student debt,” says McBride. “With federal loans at zero percent, now is a great time to make a lot of headway against the balance. At the same time, you can invest in your career mobility and work to build up your savings. That way, when you do decide to buy a home, you can afford one that you plan to be in for a while.”

That brings us to…

3. Get clear on your goals

A home is a major investment, so think carefully about where you want to live and what type of property you want before you buy — and be prepared to stay there for some time. If you didn’t make enough of a down payment to start and haven’t built much equity through appreciation, it’ll be harder to pay the closing costs to sell.

“If you’re not planning to be there for at least five years, there is no guarantee that you will come out ahead,” says McBride. “It’s important to remember that buying a home is a long-term proposition.”

4. Widen your home search

With a tight budget, flexibility is key. Instead of looking for a single-family home with a backyard in a sought-after neighborhood, for example, expand your house hunt to other options or areas.

“Maybe explore other local townships that may have more affordable pricing, or consider condos and townhomes to start,” says Judy Chin, a Realtor with RE/MAX Villa in New Jersey.

5. Look for help

The downside to being a young homebuyer: You might not be earning that much money yet. However, that can actually help you qualify for down payment assistance.

“State and local programs can provide great financial help for first-time homebuyers to help with down payments, closing costs or other costs associated with a home purchase,” says Pete Boomer, executive vice president at PNC Bank.

Check out Bankrate’s list of first-time buyer programs by state to learn your options.

Written by
David McMillin
Contributing writer
David McMillin is a contributing writer for Bankrate and covers topics like credit cards, mortgages, banking, taxes and travel. David's goal is to help readers figure out how to save more and stress less.
Edited by
Mortgage editor