How Gen Z is Surpassing Millennials and Gen X in Homeownership Rates

In an unexpected shift in the housing landscape, Gen Z, the generation born between 1997 and 2012, is outpacing previous generations in homeownership rates.

According to data from Redfin, Gen Z adults between 19 and 26 years old are achieving higher homeownership levels than both Millennials and Gen X did at the same age.

Despite a challenging real estate market, Gen Z is making moves, signaling a generational shift that could have significant long-term impacts on the housing market and the broader economy.

In this article, we’ll explore how Gen Z is pulling ahead, the factors contributing to their success, and what this means for future homeowners and the housing market as a whole.

Gen Z Takes the Lead in Homeownership Rates

According to Redfin, 27.8% of 24-year-old Gen Z adults owned homes in 2023. In comparison, when Millennials reached the same age, 24.5% were homeowners.

For Gen X, the number was even lower, with only 23.5% owning homes at age 24.

Although the margin is narrow, this lead is notable given the tough economic conditions Gen Z is navigating. Rising home prices, high interest rates, and limited housing inventory have all created significant barriers for first-time homebuyers.

Despite this, Gen Z has found ways to break into the market at an earlier age than their predecessors.

Challenges in the Housing Market

While Gen Z has made strides, the housing market remains a challenging environment for all buyers, regardless of age. Jessica Lautz, a chief economist at the National Association of Realtors (NAR), highlighted the obstacles:

“We have very limited housing inventory, and this has driven up home prices. At the same time, interest rates are higher than they’ve been in recent years, making the market more unaffordable.”

In 2023, mortgage rates climbed, making it more expensive to finance a home. The 30-year fixed mortgage rate was 2.83% in October 2020, according to Freddie Mac. This is the rate 24-year-old homeowner Dominic Verrichia secured when he bought his home in Ventnor City, New Jersey, during the height of the pandemic.

“I didn’t know if I was making the right call buying a home,” said Verrichia, reflecting on his decision to enter the housing market at such a volatile time.

Today, mortgage rates have risen significantly from the 2020 lows, and housing affordability remains a primary concern for buyers across the U.S.

Why Is Gen Z Succeeding Where Others Struggled?

One question that emerges is how Gen Z, despite these economic challenges, is outperforming Millennials and Gen X in homeownership. Several factors contribute to this phenomenon:

1. Pandemic-Era Opportunities
   The COVID-19 pandemic disrupted traditional work environments and accelerated remote work trends. Many Gen Z individuals seized the opportunity to leave expensive rental markets in large cities and move to more affordable locations where homeownership was attainable. Additionally, historically low mortgage rates during the pandemic made home buying more accessible.
2. Tech-Savvy Research and Tools
   Gen Z, having grown up in the digital age, is adept at using technology to research housing markets, mortgage rates, and investment opportunities. Online tools and resources allow them to make informed decisions, helping them find homes that meet their financial needs.
3. Financial Prioritization
   Unlike previous generations, Gen Z is entering the housing market with lower household incomes and fewer financial obligations. Many are delaying marriage and parenthood, which means they can allocate more of their income towards purchasing property. This generation appears more willing to prioritize homeownership over other traditional life milestones.

Implications for the Housing Market and the Economy

Gen Z’s early entrance into homeownership could have far-reaching consequences for the housing market and the broader economy. Here’s what we could see in the coming years:

• Increased Demand for Homes
  With nearly 75% of Gen Z planning to buy a home within the next six years, according to a survey by Rocket Mortgage, demand for housing is likely to remain high. This could further strain the already limited inventory and keep home prices elevated.
• Shift in Housing Preferences
  Gen Z homebuyers are more likely to seek smaller, more affordable homes in suburban or rural areas. This shift could lead to increased development in these regions as demand for urban housing wanes.
• Impact on Rental Markets
  As more Gen Z individuals opt for homeownership, rental markets may experience reduced demand, particularly in high-cost cities. This could push rental prices down in urban centers while increasing competition for homes in suburban areas.

Conclusion: A Generational Shift in Homeownership

While the homeownership rate among Gen Z is still relatively low at 27.8%, their ability to outpace Millennials and Gen X at the same age is a remarkable achievement. Despite the financial hurdles, this generation is finding creative ways to break into the housing market earlier than expected. With their growing interest in homeownership, the real estate landscape could see significant changes in the coming years.

For Gen Z, the dream of owning a home is not just alive—it’s thriving, despite the odds.

Also read: Gen Z to Spend $18,000 More on Rent by 30 than Millennials – Study Reveals