As Gen Z enters the housing market, young homebuyers are encountering numerous challenges to homeownership. Sixty percent of this generation fear they may never be able to afford a house.
A new survey from Clever Real Estate asked 1,000 Gen Z members about their views on homeownership. The survey found that many in this generation feel widespread anxiety about buying a home, combined with a sense of urgency to enter the market before prices rise further.
Gen Z is Facing Financial Struggles
Forgetting about buying a home, many young people are struggling just to cover basic living expenses. More than half of those who don’t own a home admit they have a hard time paying rent.
The rising cost of living makes it difficult to save for a down payment, which is traditionally the first step in the homebuying process. Twenty-nine percent of Gen Z members say saving for a down payment is a challenge, and 28% believe their savings won’t be enough.
Some of these financial struggles are due to a cooling job market, with recent graduates finding it hard to secure high-paying jobs. About 27% of Gen Z members say a lack of stable employment prevents them from buying a home. Even those with jobs report facing challenges; one-fourth of employed Gen Zers cite low entry-level salaries as a significant barrier to homeownership.
Many Americans’ wages haven’t kept up with inflation. Half of Gen Z respondents said high home prices make it difficult to become homeowners, and 31% say high interest rates are another obstacle.
“Typical financial barriers for Gen Z buyers include high student loan debt, limited credit history, and the challenge of saving for a down payment while coping with rising living costs,” says Brett Rosenthal, a real estate agent in Philadelphia.
Despite Rosenthal’s positive experiences working with Gen Z buyers, he advises young Americans facing financial difficulties to look into first-time homebuyer programs or seek help from family members.
Despite the obstacles, more Gen Zers are buying homes than millennials did at their age.
Gen Z Has Unrealistic Expectations
About one in five Gen Z members expect their first home to cost at least $450,000, just $30,000 more than the median U.S. home price of $420,000.
Nearly one in three Gen Z members believe they will eventually own a home worth more than $1 million. This percentage rises to 43% among those who do not currently own homes, suggesting that unrealistic expectations may stem from a lack of familiarity with the housing market.
Gen Z members anticipate owning modern, high-tech homes. Forty percent expect their first home to have a security system, and 29% expect advanced smart-home technology. About 22% refuse to live in a house without a swimming pool, 15% want a home theater, and 12% require a guesthouse on the property.
Many real estate agents believe Gen Z buyers haven’t adjusted to the current market.
“The years slightly before, during, and after COVID caused some Gen Z buyers to have unrealistic expectations,” Rosenthal said. “When interest rates were very low, these buyers got used to it. Now that rates have normalized, they are a bit unrealistic.”
High expectations contrast sharply with the average Gen Z member’s finances. Sixty-one percent of respondents admit they’ve saved less than $10,000 for a down payment, and 17% have no savings at all.
A $10,000 down payment at 20% would allow a Gen Z buyer to purchase a home worth $50,000. Even those putting down the same amount at a modest 10% could buy a $100,000 property. Yet only 13% of Gen Z members plan to purchase homes in that price range.
This disconnect with the market sets them up for disappointment. In fact, 65% say their home doesn’t have all the features they desire.
Not all Gen Z members have unrealistic budgets; more than half of young buyers expect to purchase modest starter homes valued below $250,000.
Gen Z Homeowners Received Financial Help from Parents
Many Gen Z homebuyers had help from their parents. One-third say their parents contributed to their down payment, and 31% said they moved in with their parents to save money.
Still, one in three Gen Z homeowners report struggling to pay their mortgage, and one in eight regret taking on expensive mortgages.
Many Gen Z Homeowners Have Regrets
More than two-thirds of Gen Z homeowners have regrets about their home purchase, with the most common regret being a lack of knowledge about the homebuying process. More than one-fifth of respondents (21%) admit they didn’t fully understand what they were getting into.
About one in seven Gen Z homeowners say they relied on poor homebuying advice from TikTok and other social media platforms, highlighting the importance of financial literacy.
Gen Z homeowners say utility bills, property taxes, and moving costs add to the already expensive homebuying process. Nearly four in five Gen Z homeowners (79%) feel their generation cannot afford homeownership.
Some Gen Z homeowners say homeownership has other drawbacks besides cost. About 38% of Gen Z homeowners report being the youngest in their neighborhood, and 13% wish more young people lived nearby.
