A recent Redfin report indicated that people in their early 20s are buying homes faster today than the generations that came before them.
The homeownership rates for 19-to-25-year-old Gen Zers are higher than those for millennials and Gen Xers when they were the same age. For example, 27.8% of 24-year-old Gen Zers are currently homeowners, compared with 24.5% of millennials at age 24 and 23.5% of Gen Xers when they were 24.
While circumstantial factors definitely played a role in the slower pace of millennials and Gen Xers becoming homebuyers, housing experts say Gen Zers also came of age with more financial know-how.
“Gen Zers have done their research,” Redfin Premier real estate agent Jon Byram pointed out. “They know all of the real estate jargon and are entering the housing market more educated than prior generations. Some young first-time buyers are also coming in with financial help from family or co-buying with family members, which boosts their buying power. And some have savings because they’ve been living with their family rent-free.”
While many Gen Z homeowners bought when mortgage rates hit a record low during the pandemic, rates were around 11% in 1989, when the oldest Gen Xers were 24. In the case of millennials, jobs were scarce when they were in their early 20s due to the Great Recession, also making home affordability difficult.
“My youngest buyers handled the pandemic homebuying frenzy the best,” Byram said. “Some older buyers had trouble grappling with the significant changes that had occurred in the market since the last time they purchased a house.”
While young adults are ahead of the older generations in homebuying in their early 20s, homeownership was stagnant for adult Gen Zers in 2023, when 26.3% owned a home. That was little changed from 26.2% in 2022, according to Redfin.
Meanwhile, 54.8% of millennials owned a home in 2023, up from 52% in 2022, and the homeownership rate for Gen X rose to 72% from 70.5% during the same period.
The rate for baby boomers remained little changed (78.8% vs 78.7% in 2022), down from a record 79.7% in 2020.
Analysts with Redfin attributed the highest mortgage rates since the year 2000 – over 8% – and high home prices as reasons for Gen Z’s “sideways” rate change last year. These factors impacted homebuyers of all ages, but America’s youngest homebuyers typically don’t have accumulated savings or home equity, as most are just starting their careers.
The oldest Gen Zers in 2023 – age 26 – were the only ones of their generation tracking behind prior generations with a 30% homeownership rate, compared with 31% for millennials at age 26, 32.5% of Gen Xers at 26 and 35.6% of boomers at 26.
Redfin analysts predict that 2024 will bring more affordability to prospective homebuyers.
As of mid-January, mortgage rates have dropped to 6.8% from almost 8% in October, pushing homebuyers’ monthly payments down more than $300 from their 2022 record high. Furthermore, an increase in sellers has led to a jump in new listings, which could ultimately put downward pressure on prices.
“Housing affordability remains strained, but things are looking up for Gen Z,” Redfin Chief Economist Daryl Fairweather said. “The recent decline in rents means Gen Zers can put more money toward saving for a down payment. Plus, the job market is strong, and career opportunities have become less concentrated in expensive cities during the remote work era, meaning many Gen Zers can choose to live somewhere more affordable.”
