As Affordability Declines, Gen Z Wants to Buy

Home affordability continues to rise beyond the reach of more Americans as prices increase faster than wages.

In the second quarter, median home prices of single-family homes and condos became less affordable than historical averages in 61 percent of counties across the nation with enough data to analyze, according to ATTOM’s second-quarter 2021 US Home Affordability Report. The 61% mark was up from 48 percent of counties in the second quarter of 2020 to hit the highest point in two years.

In 347 of the 569 counties analyzed in the second quarter of 2021, median home prices are less affordable than past averages. In the second quarter of 2020, 275 counties were less affordable than past averages. Its little surprise homes were less affordable, with prices rising 22% over the past year to a record of $305,000. ATTOM says the percentage of counties where affordability is worse than historical averages has hit its highest point since the second quarter of 2019.

In the second quarter, ownership costs on the typical home consumed 25.2 percent of the average national wage of $63,986, which is the highest point since the third quarter of 2008. In Q1 2021, that figure was 22.7 percent in the first quarter. A year ago, it was 22.2 percent in the second quarter of last year. In 327 of the 569 (57%) of the counties analyzed by ATTOM, significant ownership costs on median-priced homes consumed less than 28 percent of average local wages in the second quarter of 2021.

“Average workers across the country can still manage the major expenses of owning a home, based on lender standards. But things have gone in the wrong direction this quarter in a majority of markets as the national housing market boom roars onward,” said Todd Teta, chief product officer with ATTOM, in a prepared statement.

Among the counties with a population of at least 1 million, the biggest year-over-year gains in median prices were mainly concentrated in the Sunbelt counties that drew people throughout the pandemic. Those included San Bernardino County, CA (up 25 percent); Mecklenburg County (Charlotte), NC (up 24 percent); Maricopa County (Phoenix), AZ (up 21 percent); Hillsborough County (Tampa), FL (up 20 percent) and Middlesex County (outside Boston), MA (up 20 percent).

On the other end of the spectrum, counties with the smallest year-over-year increases (or price declines) in the second quarter of 2021 were New York County (Manhattan), NY (down 21 percent); Wayne County (Detroit), MI (down 2 percent); Bronx County, NY (up 2 percent); Kings County (Brooklyn), NY (up 3 percent) and Santa Clara County (San Jose), CA (up 4 percent).

Even though housing affordability is pushing further out of reach, nearly three-quarters of Gen Z prefers home buying over renting long-term. Forty-three percent of these aspiring homeowners are planning to enter the housing market within the next five years and 44% expect to enter within the next five to ten years, according to a Realtor.com survey.

While there was a widespread feeling that the 2008 housing crash persuaded millennials to stay out of the housing market, COVID-19 hasn’t had the same impact on Gen Z. Sixty-four of Gen Z respondents said the pandemic did not impact their homeownership plans. In fact, more than one-quarter said they feel even more strongly about buying a home due to the pandemic.

While half of Gen Zers surveyed said owning a home is important to ensuring their family has room to grow into, 40% said they aren’t ready to buy because they don’t know what their future housing needs will be.

Job stability is a significant barrier for Gen Zers, with only 43% currently employed. However, almost half of those surveyed say they are already saving toward buying a home. Still, 75% did not move home during the pandemic to save on rent. Only 17% of those who did move home saved money to put toward a down payment.