SANTA CLARA, Calif.,
Jan. 22, 2020 /PRNewswire/ -- The
oldest members of Gen Z are beginning to enter the homebuying stage
of their lives, but they will have to compete with the might of the
millennial generation for the nation's depleted inventory of entry
level homes. Gen Z, the oldest of whom turned 22 in 2019,
currently make up 2 percent of mortgages, according to
realtor.com®'s Fourth Quarter 2019 Generation Propensity
Report, but that number will continue to grow as the generation
ages and their earning potential increases.
"Gen Z is entering the housing market under the radar, but at a
projected 65-million strong, they are going to begin making some
major waves," according to realtor.com®'s Senior
Economist George Ratiu. "However, as
the young generation launches into homeownership, it is facing
strong headwinds, including competition from millennials, many of
whom are entering homeownership later in life, and a marketplace
largely devoid of entry-level options."
According to a survey conducted in 2018 by
realtor.com®, 40 percent of Gen Z members stated they
want to own their own home by the age 25. As the oldest cohort of
Gen Z approaches that age, realtor.com®'s recent
analysis shows they are starting to steadily increase their share
of national home purchases.
"With major generational transitions taking place across a
housing landscape clouded by lack of new construction and a
shortage of inventory, young Americans' preference for
homeownership is a ray of sunshine," added Ratiu. "It stands in
contrast to the rhetoric of the past decade, cataloging young
people as the 'renter generation,' and provides ample evidence that
a significant ramp-up in affordable new home building is needed to
meet the growing demand."
Depleted entry-level inventory
With a lack of homes priced under $200,000 being built or available for-sale, Gen
Z, those born between 1997 and 2012, will find it increasingly
difficult to find a home within their price range.
During the fourth quarter of 2019, the median purchase price of
a home by Gen Z was $160,600. Then in
December, the inventory of homes priced below $200,000 decreased by 18.1 percent
year-over-year, according to realtor.com®'s December
Monthly Trends Report. Although Gen Z increased their median
purchase price by 11 percent over the past year, they are still
many years away from catching up to millennials both in life stages
and housing budgets.
In order to find homes within their budget, Gen Z is
turning toward smaller Midwestern and Southern markets that boast
higher affordability. Toledo,
Ohio; Grand Rapids, Mich.;
and Wichita, Kan., were the top
three metros where Gen Z had the largest share of homeownership.
The top 10 Gen Z markets had a combined median listing price of
$224,500, which is 25 percent less
expensive than the nation's median listing price of $300,000.
Top 10 Generation
Z Housing Markets
|
Metro
|
Region
|
Q4 2019 Generation
Z
Share of Loan
Originations
|
December 2019
Median Listing Price
|
Q4 2019 Generation
Z
Median Purchase
Price
|
Toledo,
Ohio
|
Midwest
|
5.35%
|
$151,500
|
$91,333
|
Grand Rapids-Wyoming,
Mich
|
Midwest
|
4.43%
|
$284,700
|
$140,000
|
Wichita,
Kan.
|
Midwest
|
4.40%
|
$199,250
|
$113,667
|
Virginia
Beach-Norfolk-Newport News, Va.-N.C.
|
South
|
4.36%
|
$304,050
|
$209,505
|
Winston-Salem,
N.C.
|
South
|
3.53%
|
$275,050
|
$114,667
|
Scranton--Wilkes-Barre--Hazleton, Pa.
|
Northeast
|
3.43%
|
$159,950
|
$135,333
|
Oklahoma City,
Okla.
|
South
|
3.41%
|
$250,050
|
$117,667
|
Cincinnati,
Ohio-Ky.-Ind.
|
Midwest
|
3.39%
|
$259,950
|
$129,333
|
Youngstown-Warren-Boardman, Ohio-Pa.
|
Midwest
|
3.32%
|
$119,950
|
$86,487
|
Baton Rouge,
La.
|
South
|
3.14%
|
$240,550
|
$165,333
|
Gen Z will be competing with millennials for years to
come
The largest cohort of the millennial generation turns
30-years-old in 2020 and they are hitting the housing market in
full force. At the end of the fourth quarter of 2019, millennials
made up the largest generational segment of homebuyers, growing
their share of home purchase mortgages to 48 percent.
Millennials (born between 1981 and 1996) began entering the
market at the height of the housing market crash in 2008 and the
subsequent recession. Additionally, the generation found itself
saddled with massive student loan debt, which caused many to delay
their goals of homeownership, but that is all in the past. Now, as
Gen Z begins to enter the market they are facing increased
competition from millennials who patiently waited to purchase a
home.
At the moment, Gen Z and millennials have differing preferences
on where to buy a home. Of the markets on Generation Z's top 10
list, only Grand Rapids, Mich.,
and Baton Rouge, La., appeared on
the top 10 list for millennials. Larger and trendier markets such
as San Francisco, Boston, and Denver were the most different between the
generations. All three markets made it to the top 20 markets for
millennials but ranked between 81 and 98 for Generation Z, most
likely due to high housing prices shutting out Gen Z buyers. As Gen
Z turns their interest toward larger metros in the future,
competition between the generations is likely to increase, but at
the moment, the two generations have a different focus, according
to the realtor.com® analysis.
Methodology
The Report on Loan Originations by Age and Generational Groups
is based off of a realtor.com® analysis of a sample of
residential mortgage loan originations from Optimal Blue. The top
market rankings were calculated using a group's mortgage
origination share.
The generational groups are defined as follows:
- Millennials: born between 1981 and 1996
- Generation Z: born between 1997 and 2012
About realtor.com®
Realtor.com® makes buying, selling and living in
homes easier and more rewarding for everyone.
Realtor.com® pioneered the world of digital real estate
20 years ago, and today through its website and mobile apps is a
trusted source for the information, tools and professional
expertise that help people move confidently through every step of
their home journey. Using proprietary data science and machine
learning technology, realtor.com® pairs buyers and
sellers with local agents in their market, helping take the
guesswork out of buying and selling a home. For
professionals, realtor.com® is a trusted provider
of consumer connections and branding solutions that help them
succeed in today's on-demand world. Realtor.com® is
operated by News Corp [Nasdaq: NWS, NWSA] [ASX: NWS, NWSLV]
subsidiary Move, Inc. under a perpetual license from the National
Association of REALTORS®. For more information,
visit realtor.com®.
Media Contacts:
- Cody Horvat -
cody.horvat@move.com
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SOURCE realtor.com