Gen Z is Getting into the Homeowner Game

Article originally posted on HERE on June 26, 2023

America’s youngest generation to come of age is taking on mortgages despite steep economic hurdles, including pandemic graduations and student loan debt, Axios’ April Rubin reports.

By the numbers: 17.6% of mortgage requests made in Phoenix in 2022 were from Gen Z members, a June report from LendingTree found.

• Phoenix had the 12th highest percentage of the cities included in the report.
• The average down payment by Gen Z homebuyers here was $29,446, and the average requested loan was $307,864.
• Gen Z made up only 4% of U.S. homebuyers in 2022, according to a trends report by the National Association of Realtors.

Why it matters: The outlook for Gen Z isn’t unlike that of millennials, a group that now includes more homeowners than renters.

• “Gen Z’s really defining feature is coming of age during the pandemic,” said Pamela Aronson, a sociology professor at the University of Michigan-Dearborn, who has studied the age group. “So the opportunities and the resources that are available will impact this generation.”
• Some Gen Zers may have even fared better than millennials when they were the same age, according to 2023 RedFin data.
• In 2022, 30% of 25-year-olds owned their homes, compared with 28% when millennials were 25.

Driving the news: Gen Z — considered those born between 1997 and 2012 — made up more than 20% of mortgage requests last year in Salt Lake City, Oklahoma City, Birmingham, Indianapolis, Cincinnati and Louisville.

• Minneapolis, St. Louis, Nashville and Kansas City, Missouri, were other popular metros for interested home buyers.
• In historically less-affordable cities like San Francisco, New York and Los Angeles, Gen Z made up less than 10% of requests.
• Although adult Gen Zers (ages 18 to 25) account for an average of 14.91% of potential homebuyers across the nation’s 50 largest metros, that figure will likely grow over the coming years as the younger members of the generation begin their adult lives, the LendingTree report said.

The big picture: Remote work changed young people’s attitudes toward housing, said Gregg Witt, a marketing strategist who co-creates products, experiences and campaigns with Gen Z.

• The flexibility allowed people to feel comfortable moving to new cities or making choices that weren’t based on a job, he said. Some people he works with have been moving frequently to experience new areas, he added.
• The pandemic also led people to seek larger spaces, where they felt comfortable both living and working.

Reality check: High home prices and rents, steep interest rates and slow construction have all impacted affordability, per a report released last Wednesday by Harvard University’s Joint Center for Housing Studies.

• Student debt and high interest rates have prevented some people from making the step to own property, said David Howard, CEO of the National Rental Home Council.
• “Homeownership, renting, housing arrangements — these things are obviously tied to finances, they’re tied to career opportunities, they’re tied to inflation,” Aronson said. “All of those things are impacting what Gen Z is able to do.”