Get ready. Generation Z is preparing to enter the housing market over the next few years.
Almost three-quarters of this cost-conscious generation, currently aged 18 to 25, would prefer to own a home rather than rent one, according to a recent Realtor.com® survey. That’s likely because it can be more financially beneficial to own and build wealth rather than deal with escalating rents each year—and this generation is known to be careful with their money.
They don’t plan to waste much time becoming homeowners. About 43% hope to purchase their first abode within the next five years. Another 44% anticipate doing so within the next five to 10 years.
More than 700 members of Generation Z, who haven’t yet bought homes, participated in the survey. It was conducted from March 26 to April 7.
“This generation is by and large not in the market yet,” says Realtor.com Senior Economist George Ratiu. However, they “already see the financial benefits of investing in real estate. Given how young they are, this level of financial maturity is applaudable.”
This generation isn’t being tempted by expensive city life. Only about a third would prefer to live in an urban area. Meanwhile, nearly half of this generation, 49%, envisions forgoing the bright lights and heading to the suburbs. About one-fifth, 19%, plans on buying in a more rural area where they can often find more space for their money.
“The experience millennials have had, migrating to the cities and paying a premium to live there only to end up a decade later unable to afford homes, may have been a lesson for Gen Z,” says Ratiu. “It may have led to look toward more affordable alternatives. It also helps that today’s suburbs look a lot more like smaller versions of urban downtowns.”
The COVID-19 pandemic hasn’t dampened their plans to become homeowners. Nearly two-thirds say it hasn’t affected their goal, and more than a quarter claim they want to buy a home even more as a result.
However, they may have to wait on their dreams. For many, job stability is holding them back as they are still in college or just entering the workforce or in entry-level (i.e., lower-paying) positions. Many of these aspiring homeowners would be in the market today if they could afford a down payment.
Many also aren’t in established relationships or having children yet. So it’s hard to plan for the kinds of homes they might need down the line.
“They’re just at the start of their professional careers. They don’t have the down payment,” says Ratiu. “They’re still trying to figure out their lives and their relationships.”