Young Americans are struggling to afford regular housing payments, with 79% of Gen Z and millennial renters and 41% of homeowners in those generations reporting that they have difficulty managing housing expenses, according to a Redfin report based on a survey conducted in May. Although older Americans are less likely to struggle, more than half of baby boomer renters and more than two-thirds of Gen X renters said they have a hard time making their regular housing payments.
Housing payments have become increasingly difficult to keep up with because, although wages have increased, the cost of buying a home has increased more, according to the report. The median U.S. home price has increased more than 40% since before the pandemic and mortgage rates have doubled. Meanwhile, wages have increased by about 28% over the same period and the median asking rent grew by about 22%.
Young Americans at the start of their career feel this gap more because they are likely to earn less than their older counterparts. They are also more likely to be paying off student debt and less likely to have access to equity from a previous home sale. To free up money, members of all generations are making sacrifices, Redfin found.
Forty percent of Gen Z and millennial renters said they are eating out less so they can afford housing payments. This cohort also reported taking fewer vacations, borrowing money from family and friends and working extra shifts. One in five young renters said they have skipped meals entirely to make their monthly payments, while the same percentage have sold belongings, and 19% said they have delayed medical treatments to free up money for rent.
Young homeowners were even more likely to sacrifice to afford their mortgage payment, including 43% who said they are eating out less and 36% who are taking fewer vacations. The report found this group is less likely to sacrifice necessities, with only one in 10% skipping meals and only 13% delaying medical treatments.
Additionally, older Americans are also having to make sacrifices. This includes non-essentials, like eating out and taking vacations, to afford housing. Forty-five percent of both baby boomers and Gen X homeowners said they ate out less often and two in five of both groups took fewer or no vacations.
“Many Gen Zers and millennials are making real sacrifices — picking up side gigs, selling their possessions, even delaying doctor’s appointments — just to pay for the basic need of housing,” Daryl Fairweather, Redfin’s chief economist, said.
“At the same time, a lot of the young people who can easily afford housing can do so because they have major financial support from their parents, with roughly one-quarter of the young Americans who recently bought a home using family money for their down payments. With the cost of buying a home rising much faster than wages, people without access to family money are much more likely to struggle to pay for housing — which could widen the gap between the haves and the have-nots in the future.”
There may be some relief on the horizon as mortgage rates have dropped to a 10-month low, giving buyers more purchasing power. In addition, fewer homes are selling above asking price, and many sellers are willing to negotiate as for-sale inventory rises. Affordability has started to improve in several major metro areas, with the income needed to afford the median-priced home declining from a year ago in 11 of the biggest U.S. metros, including parts of California and Florida, according to Redfin.
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