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Unprecedented growth in home prices over the last two years and recent increases in mortgage interest rates are pricing many would-be buyers out of the residential real estate market. One of the groups most disadvantaged by these market challenges is young homebuyers like those in Gen Z, the population of Americans born between 1997 and 2012.
Young buyers in any generation have a harder time buying homes because they tend to earn less and have less in savings or existing equity than older buyers. But Gen Z and younger Millennials in some ways face even greater challenges. The explosion of student debt and increasing rents over the last decade have stretched budgets even further, making it more difficult to save, and rising home prices have put even starter homes further out of reach. Only around 34% of adults aged 20 to 34 own homes today, compared to 44% in 1960.
Young buyers also face competition in the market from older generations. Millennials (ages 26 to 41) are now America’s largest generation by population and make up 37% of all U.S. homebuyers. Generation X (aged 42 to 57) is smaller in size but its members are in their peak earning years, giving them more financial resources to buy homes. And older Americans in the Baby Boomer and Silent Generations are increasingly choosing to age in place, which has constrained the supply of homes available for younger buyers.
Young people’s changing social and economic norms have also delayed other major life milestones like marriage and childrearing, but there appears to be some evidence that places where people get married younger also have more young people who own homes. States where the typical age for a first marriage is older have some of the lowest rates of Gen Z homeownership, while states where marriage happens earlier have higher rates. Part of this may be simply financial, as a household with combined incomes will have more means to buy a home, and part of it may be lifestyle-related, as a married couple would be more inclined to put down roots in a location.