A small but growing share of the nation’s Gen Z population is managing to buy a home despite historically high and unaffordable prices.
With the average age of first-time buyers reaching 40, Gen Zers are outpacing millennials, many of whom also struggled to buy a home at the same age.
That’s according to NPR, which said the buyers are less likely to use help from parents and are far more likely to be single buyers, especially women.
“Gen Zers seem to have learned from millennials,” said Jessica Lautz, deputy chief economist at the National Association of Realtors, which tracks buying trends. She also credits their use of social media for financial planning. “They’re embracing the knowledge that is at hand.”
NPR cited as an example Francisco Vazquez, a 27-year-old in Milwaukee, who recently bought a yellow three-bedroom home with a basement, garage, and yard, NPR said.
Vazquez spent hours this spring fixing it up before moving in, starting with tearing out the carpet, NPR noted.
“I sanded down all the hardwood floors, stained them again. I was adding polyurethane today. It’s looking really nice,” he said.
NPR said that Vazquez changed careers to make homeownership happen.
Overcoming Low Pay
He majored in conservation science, on a scholarship with no student loans, and then moved to Texas to work in that field. First, Vazquez helped rescue alligators and place them in a sanctuary, then got a job at a zoo.
The pay was so low that he started questioning the value of his college degree.
“I wasn’t going to be able to support a wife, let alone kids, or buy a home,” he said.
Making it financially is important to Vazquez. His parents didn’t have much and relied on government assistance.
So, Vazquez moved back home to Wisconsin, thinking he’d become an electrician, but stumbled on a job posting to help manage a fast food restaurant, which, it turned out had great pay and benefits.
He got the job, and he’s been promoted twice, NPR said.
For two years, one living with his parents and one renting on his own, Vazquez saved aggressively.
“Most of my paycheck, probably like 70%, [went] into just a broad index stock,” he said.
$72,000 in Savings in Two Year
NPR said that the biggest challenge to his spartan spending plan was when he started dating the woman he would later marry, who felt they should spend a bit more to have fun while they’re young.
Vazquez, however, was able to build up a whopping $72,000 in savings in just over two years.
NPR noted that Milwaukee is also among a number of smaller, affordable cities where Gen Z is more likely to buy. At $220,000, his home was nearly half the national median price, NPR said.
By putting down a large down payment, Vazquez – not yet 30 – has a 15-year fixed rate mortgage, and an ambitious plan for the future, NPR noted.
“My biggest goal at the moment is just to retire early,” he said. “So buying a home helps me buy myself more freedom in general.”
NPR noted that the rise in the youngest homeowners is noteworthy because of the odds stacked against them.
Record High Unaffordability
NPR said that a massive housing shortage has pushed prices to record high unaffordability for both renters and owners, and that rising home costs have far outpaced paychecks.
Lower cost starter homes have disappeared in many markets, while most new construction is geared to the higher end, NPR noted.
While people in their 20s remain a sliver of buyers overall, they’re growing.
The National Association of Realtors found last year 4% of homebuyers were Gen Z, up from 3% the year before. The group counts buyers 18-26, although other definitions of the generation include those a couple of years older, NPR said.
Overall, Gen Z homebuyers had an average household income of $76,000, according to NAR, and they are financially savvy.
“They’re taking advantage of government [down-payment assistance] programs at higher rates than all other generations,” said NAR economist Lautz. “They seem to be a little more reticent when it comes to student loan debt, which has historically been one of the biggest hurdles for millennials to enter into homeownership.”
While 16% of Gen Z buyers did get a gift or loan from parents, that’s lower than for young millennials, and less than the traditional average of 25% of all ages who borrowed from their parents. Instead, Gen Zers are more likely to tap a 401K, which is possible because they’re saving for retirement earlier than the previous generation, NPR noted.
Another difference, NPR noted, is that the share of single Gen Z buyers is double that of millennials at the same age.
COVID Had an Impact
“I asked around the office to try and understand what’s happening here, and I was reminded, COVID,” Lautz said. “So I think perhaps delays in getting marriage started, and partners started, could be one of the things going on here for these young adults.”
New research from LendingTree noted that an estimated 19.9% of all mortgage requests nationwide are from Gen Z.
Though they account for a sizable portion of mortgage activity worldwide, and younger buyers are more prevalent in some locations than others, LendingTree said. According to the research, their impact is far less noticeable in expensive coastal cities and more noticeable in more reasonably priced Midwestern metro areas.
