Gen Z Values Homeownership
Gen Z Values Homeownership
- Gen Z values homeownership: 72% want to buy a house in the future
- Over half of Gen Z lives in suburbs and prefers them to downtowns
- 71% of Gen Z adults plan to move in next 5 years
- 43% of Gen Z members expect to buy a house within 5 years and 45% are saving for it
- Employment stability and housing affordability are key
Real estate markets have been riding a rising wave of favorable demographics for over a decade. Since the 2008-09 housing bust, demand for housing has been growing at a strong pace, fueled by the millennial cohort moving into its third decade, and embracing the trappings of this stage of life: families, children, larger houses in the suburbs. Importantly, the aging of millennials busted a decade of myth-making which positioned the Gen Y cohort as fundamentally different in its preferences from prior generations. Millennials were dubbed the “renter generation,” and expected to shun ownership, opting instead to rent apartments in high-density downtowns, use public transit, bikes, electric scooters, or ride-hailing services for their transportation, and avoid the suburbs of their parents’.
In reality, it became clear that stage-of-life changes led to a natural evolution in preferences and behaviors. While in certain ways millennials are different—stayed longer in school, started jobs later, formed families and had children later, and consequently, started buying homes later—most of these differences were results of economic and financial pressures. Along with children and families, millennials embraced homeownership, and have been the dominant force behind real estate activity for the past few years.
This perspective is important as we welcome the youngest cohort into adulthood, and discuss how its members relate to real estate markets and the broader economy. This spring, realtor.com partnered with HarrisX to survey a national sample of Gen Z adults, between the ages of 18 and 24, who were not active in real estate markets as buyers or sellers. We wanted to find out how their stage of life influenced their views on real estate and homeownership. The data shine a spotlight on a cohort still working its way through college, or on the early path of its professional trajectory. Interestingly, however, Gen Z values homeownership, and a majority states that it would prefer to buy instead of rent their homes in the long term.
Gen Z adults are taking the first steps into adulthood
The survey results underscore the Gen Zers’ stage-of-life, with its oldest members just taking their first steps into adulthood. The majority of respondents (82%) is single, with no minor children in the household.
Close to 45% of Gen Z members are employed, with shares almost equally split between full and part-time, while 6% are self-employed. Significantly, 34% are students and 13% are not employed but are currently looking for work. Being at the start of their careers, the majority (61%) have yearly incomes below $50,000.
Over half of Gen Z lives in suburbs and prefers them to downtowns
Millennials moved to urban downtowns in large waves during the early years of their careers, leading to the urban renaissance of the 2010s and prompting many companies to leave suburban office parks for glass-shrouded buildings in central business districts. However, as they matured and looked for affordable housing to accommodate growing families, many millennials found downtowns unaffordable, and have been moving to the suburbs. The pandemic accelerated the shift over this past year.
For Gen Z, the suburbs are not only where 51% of them currently live, but also where 49% of those who plan to buy in the future also prefer to live. Thirty-five percent of Gen Z adults live in urban centers, and only 32% of those who want to buy at some point plan to purchase a home in a high-density downtown.
We asked Gen Z adults if they moved back home, to be with parents or family members during the COVID pandemic. Only 25% of them said that they did, while the majority did not. We also asked those who moved back home if they saved the money they would have spent on rent, or if they planned to use the rent savings toward a down payment on a house. Seventeen percent indicated that they planned to use the rent savings as a down payment. Meanwhile, 46% had other plans for the savings, and close to four-in-ten did not save any money.
71% of Gen Z adults plan to move in next 5 years
Befitting the fact that a large share of Gen Z is still in college, and many are starting out in their careers, the majority (71%) of this cohort’s members are likely to move in the next 5 years. Fifteen percent plan to live in their current location less than a year, while just over a quarter plan to relocate within the next two years. With college or graduate school likely still on the horizon, a third of Gen Z plans to switch locations in the next 2 – 5 years.
Gen Z’s top reason for moving is related to a job. With the oldest members in the generation reaching 24 years, many are starting their professional journeys, and location flexibility is important when considering first jobs. The second highest reason was “Other,” a mix dominated by continued college or graduate school education and a better location. Proximity to family and friends was ranked third-highest, with about one-in-five responses.
72% of Gen Z Americans want to buy a house in the future
Given the early stage of life for the Gen Z cohort, as well as their experience with the real estate cycle of the past decade, it is interesting to see that a majority of Gen Z adults want to buy a house in the future. The preference for homeownership at younger ages bodes well for real estate markets, as we consider demand over the decade ahead of us.
The COVID pandemic of this past year has clearly impacted housing, along with our health, finances and everyday lives. For Gen Z, the impact on housing has been more muted, but still noticeable—26% indicated that they were more interested in buying post-pandemic.
For Gen Z, the top reason for wanting to buy a house in the future is tied to expectations of growing families—moving in with a partner and having kids. Rounding out the top three reasons for buying at some point are the need for more space, closely followed by the desire to save money on rent payments.
Conversely, for Gen Z respondents who indicate they prefer to continue renting, freedom of mobility is the number one reason for maintaining flexibility, along with less hassle and not needing to save for a down payment.
43% of Gen Z members expect to buy a house within 5 years and 45% are saving for it
With the oldest members of the Gen Z cohort turning 24 this year, the next five years will likely offer significant changes, on the professional and personal fronts. Like millennials before them, who shifted their housing preferences as they approached their 30s, over four-in-ten Gen Zers indicated that they expect to buy a house within five years. An additional 44%, likely representing those still enrolled in higher education institutions, think they will be able to buy a home in 5-10 years.
Furthermore, consistent with their stated preference for buying a home in the medium-term, 45% of Gen Z adults are saving money to use toward buying a house. Considering the upward trajectory of home prices over the past year, this is both a strong motivational indicator and a likely acknowledgment of housing market dynamics for many young people.
Employment stability and housing affordability are key
When we asked Gen Z respondents what are the main challenges they face on the road to homeownership, the main themes revolve around employment and affordability. This generation has experienced the extreme job losses of 2020 first-hand, with April alone seeing companies erase over 20 million positions, a decade’s worth of gains. While we have taken solid steps toward recovery, the economy is still short about 7.5 million jobs as of May 2021.
Not surprisingly, job stability is the top challenge keeping Gen Z adults from buying a house. Tied in second place, respondents list the lack of affordability and the lack of sufficient funds for a down payment as obstacles to owning a home. Also fitting with their early stage-of-life and expected relocations, Gen Z members are unsure about their housing needs over the next few years.
Implications for housing
As the Gen Z cohort matures over the coming decade, it is expected to play an increasing role in the economy and real estate markets. Based on preliminary research, the generation seems to share many common traits with millennials—highly educated, digital natives, diverse, and socially active. Given their stated preference for homeownership at an early stage, the housing industry should be prepared for millions of Gen Z buyers to bring a new wave of demand along a similar stage-of-life timeline as the millennial generation before them. With the intense shortage of available homes for sale, it seems imperative that we consider measures, especially at state and local levels, to ease the burden and costs of building affordable housing over the next 10 years.
Methodology: Realtor.com® commissioned HarrisX to conduct a national survey of consumers. This survey was conducted online within the United States from March 26 – April 7, 2021. The survey was conducted among 3,998 adults. The sampling margin of error of this poll is plus or minus 1.6 percentage points. The results reflect a nationally representative sample of adults. Results were weighted for age, gender, region, race/ethnicity, and income where necessary to align them with their actual proportions in the population. In addition to the general population, an oversample was collected for Gen Z not yet in the housing market. The oversample was weighted to align with the original sample. There are 708 Gen Z respondents, defined as those aged 25 and under who have never bought a home and are not planning to buy in 2021, with a margin of error of plus or minus 3.1 percentage points.