Gen-Z Could Ramp Up Homeownership in Next Five Years
Gen-Z is much more open to homeownership than millennials, and the oldest segment of the generation plans to buy a home in the next five years.
“Gen-Z has seen a lot of insecurity of rent burden and lack of homeownership. Pairing that with the fact that Gen-Z has grown up with a safe luxury,” Eliza Theiss, author of the report at Property Shark, tells GlobeSt.com. “This generation is used to the idea of having a home and the idea that a home brings certain securities and freedoms. I think seeing that millennials have not had that security or that this generation has needed to move back in with their parents has also contributed to this trend.”
One of the principal differences between millennials and Gen-Z is the recession. Millennials were starting out in job market during the recession. Gen-Z, on the other hand, wasn’t old enough during the last recession to be impacted. Plus, the demographic group is benefitting from a strong and expanding economy and healthy job market. “Gen-Z is in a stronger economy starting out than millennials were, and that gives them a better starting place,” says Theiss. “For that reason, we may see Gen-Z overtaking the housing market from millennials.”
This emerging trend could have a major impact on apartment leasing velocity and development, as demand grows for more for-sale product, including condo units. Today, homebuilders are already failing to meet the demand for for-sale housing, and a wave of demand from Gen-Z could put more pressure on the market. “This will lead to more pressure on the homebuilding industry, which is already not keeping up with demand,” Theiss explains. “Every market that we are looking at, there is more demand for homeownership than there is supply. As a result, there is an increase in home prices across the nation. Obviously both millennials and Gen-Z are focused on urban living, and there are not enough homes being built in those markets. We are not seeing the supply and we are not seeing the right type of supply.”
While Gen-Z plans to buy homes in the next five years, Theiss notes that these plans might not come to fruition. There are still many roadblocks to homeownership, from down payments to student loan debt, which the report lists as the top two obstacles to homeownership. “I don’t know how much you can expect that they will be able to fulfill their dreams. I think there is a lot of wanting on their side,” she adds. “It remains to be seen how the economy helps them fulfill their goals.”
In the next five years, millennial demand for homes could also increase as the demographic ages and begins a family. “Although millennials still see homeownership as being risky, I think they will also move toward homeownership. Millennials have already started to move back to suburbs as they start families,” says Theiss.
Increasing demand for for-sale homes from both demographic groups will certainly put more pressure on home developers as well as upward pressure on pricing as supply tightens.