Gen Z is no longer an emerging homebuyer segment — it's becoming a primary source of purchase business. New Intercontinental Exchange (ICE) data shows the generation accounted for a record 20% of purchase rate locks in the second quarter, while Millennials and Gen Z now make up two-thirds of purchase mortgage lending.
The ICE Mortgage Monitor report suggests that even with affordability remaining a challenge, younger buyers continue finding ways into homeownership through government-backed financing and increasingly creative approaches to funding down payments.
At the same time, home price appreciation accelerated in June, underscoring that affordability pressures remain even as inventory continues to improve.
"Gen Z's rise to nearly 20% of rate locks is one of the clearest signs yet of a generational handoff in the homebuying market," said Andy Walden, head of mortgage and housing market research at ICE. "Despite facing one of the tougher affordability environments in decades, younger buyers are finding ways to become homeowners."
ICE said Gen Z's market share is likely to continue climbing because much of the generation is only beginning to enter its prime homebuying years. The oldest members of Gen Z are approaching age 29, placing more of the generation squarely within prime first-time homebuying years. ICE found the cohort now represents nearly one-third of all first-time homebuyer mortgages and 27% of FHA purchase lending, highlighting continued reliance on government-backed financing to overcome affordability constraints.
For loan officers, the findings reinforce a trend that's been building over the past several years: first-time buyers remain the primary source of purchase opportunity even as higher mortgage rates continue to suppress overall transaction volume. That makes education around FHA financing, down payment assistance programs, and first-time buyer strategies increasingly important for lenders competing for younger borrowers.
Alternative Down Payment Strategies Grow
The report also found buyers are relying less exclusively on traditional savings to purchase homes.
While 71% of buyers still used personal savings for their down payment, nearly 29% relied on nontraditional sources, the highest level recorded in seven years.
Among Gen Z buyers, 13% received family gifts to help fund their purchase while 8% used loans as part of their down payment strategy. Baby Boomers, by contrast, were more likely than any other generation to tap retirement savings.
The growing use of alternative funding sources reflects the continued affordability pressures facing today's buyers, particularly younger households attempting to purchase their first home while home prices remain elevated.
The findings suggest lenders should expect more borrowers to rely on gifts, loans, and other non-savings sources when assembling down payments, making documentation requirements, and borrower education an increasingly important part of the origination process.
Boomers Shift Toward Equity Access
While younger generations continue driving purchase activity, Baby Boomers remain active for a different reason.
ICE found Boomers accounted for 31% of cash-out refinance activity during the second quarter while representing just 11% of purchase lending. Their debt-to-income ratios on cash-out refinances also exceeded those of other generations, suggesting some homeowners are stretching monthly budgets to access equity accumulated during the post-pandemic run-up in home values.
The divergence illustrates how different generations approach today's market: younger borrowers are focused on entering homeownership, while many older homeowners are leveraging accumulated equity rather than moving.
Home Price Growth Picks Up Again
The report also showed home price appreciation strengthened during June.
According to the ICE Home Price Index, annual home price growth accelerated to 1.3%, the strongest pace in more than a year. Seasonally adjusted prices increased 0.29% month over month, while 72% of housing markets posted prices above year-ago levels, the highest share in more than a year. Nearly 91% of markets recorded seasonally adjusted monthly gains during June.
ICE noted that housing inventory has continued to increase, however, which could moderate future price appreciation even as today's market shows renewed pricing strength.
Technology Becoming A Competitive Differentiator
The demographic transition is also creating new operational demands for lenders, according to ICE.
"For lenders and servicers, the generational shift in the borrower base is more than a demographic footnote, it's a competitive inflection point," said Bob Hart, president of ICE Mortgage Technology. "As Gen Z enters the market in force, organizations that have modernized their technology stack and customer engagement capabilities will be far better positioned to serve the next wave of homebuyers."
Together, the findings point to a purchase market increasingly driven by younger borrowers who continue finding ways into homeownership despite affordability pressures. For lenders, that means demand for first-time buyer expertise, government-backed lending options, and guidance on alternative down payment strategies is likely to remain strong even as inventory improves and home price appreciation regains momentum.
