Generation Z's Impact On The US Housing Market

While some might still think of Generation Z, or zoomers, (born between 1996 and 2010) as kids, they're actually anticipated to overtake boomers in the full-time workforce in 2024. As they mature and join the older ranks of society (the oldest Gen Zers turn 28 this year), the cohort brings with them unique perspectives and financial habits (like being a generation of bad tippers, for instance). While this generation is still starting out in the full-time adult world, they're already bringing a different demographic to existing markets. Perhaps one of the most interesting shifts that will unfold in the next decade is how Gen Z will ultimately impact the housing market.

According to the 2023 National Association of Realtors Home Buyers and Sellers Generational Report, Gen Z made up 4% of homebuyers in 2023. While this might not sound like much, it was an increase over the year prior and indicative of how Gen Z has begun to enter more mature financial landscapes. Gen Zers also have different buying habits than other generations. According to NAR's report, Gen Zers purchased the smallest properties across all generations of buyers — under 1,500 square feet.

Also interesting to note is that most Generation Z homebuyers moved directly from their parent's home to their own home, entirely skipping the independent renting phase that previous generations have typically gone through. This is due to several factors, including skyrocketing rent prices in the United States and shifting family demographics. For instance, according to the Census Bureau, there has been an 87.4% increase in the number of adults living at home (i.e., their parent's home) since 2001.

While the concept of the American dream once included homeownership, this idea is increasingly less valued with each new generation. This is partially due to the astronomical rise in home prices across the country. The average home price for the first quarter of 2024 was $420,800, according to the Federal Reserve Bank of St. Louis. That represents a 28% increase over the first quarter of 2020, when the average price was $329,000. It's also worth mentioning that the recent rise in interest rates has made homeownership an even more difficult prospect for U.S. consumers, including Gen Zers.

All of these factors combine to make the financials of homeownership an increasingly harder sell, and for Gen Zers just starting their careers, saving enough money for even a down payment can feel like an impossibility. This is part of why more Gen Zers are choosing to stay at home longer than any generation before them. A 2023 Bloomberg News and Harris Poll survey found that 70% of young adults (aged 18 to 29) who lived with their parents reported not being in a strong enough financial position to afford to live anywhere else.

As Carol Sigelman, professor of social psychology at George Washington University, explained to Bloomberg, "We're in an economy where it's harder to live independently. Adults recognize that it's tough these days." The addition of this third option (staying home for longer) has made the debate between renting versus buying even more complicated.

One of the possibilities for Gen Zers staying home longer is that they will be able to save up for homeownership sooner than millennials were before them. In the aforementioned Bloomberg News and Harris Poll survey, 24% of Gen Zers said that they lived at home in order to save up for a down payment. Yet another factor that could change the housing market for Gen Z is the rise of remote work, which has opened wider geographic possibilities for those looking to buy. By having a wider range of places to live, Gen Z could potentially afford to purchase in a more affordable area. For instance, according to Realtor.com, the U.S. metro area with the largest percentage of Generation Z homebuyers was Jacksonville, North Carolina (with 17.9%). Other top Gen Z locations included Elkhart, Indiana, and Lima, Ohio.

Despite the changes Generation Z might eventually bring to the housing market, it's important to realize that they, like millennials, will face a more difficult economic outlook than baby boomers and even Generation X experienced before them. According to the National Association of Realtors, the average age of first-time homebuyers reached a record high of 36 in 2022, highlighting the strained financial circumstances of the country's younger generations.

Similarly, the share of first-time homebuyers reached a record low at 26%. To emphasize how dire the housing circumstances are for young people today, the last time the country experienced the same rate of young adults (ages 18 to 29) living with their parents was in 1940 (that is, during the Great Depression).