The youngest adults are in Generation Z, and they’re coming of age in trying times — particularly if they want to own a home. Income rises steadily with each level of education, but in order to go to college, average people have to take on mountains of student debt. Real estate prices are sky-high thanks to the hottest housing market in a generation. Inflation is rising, wages have been stagnant for decades and then there’s the little thing of a global pandemic that killed millions of people and shattered economies around the world.
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Even so, for Gen Zers who dream of owning a home, there’s plenty of sunshine to bask in.
Despite the Odds, Gen Z Sees Plenty of Silver Linings
A recent GOBankingRates study polled 500 renters about their feelings on homeownership, if they strive to buy a house and when they think that might happen.
Not surprisingly, only around 2% of the 18- to 24-year-olds surveyed thought they were in a position to buy a home right now. What was striking, though, was the fact that nearly 1 in 3 — a little under 30% — were confident that they could become homeowners in the next five years. A full quarter believed the dream would be a reality within just two years and nearly 1 in 5 thought they could pull it off in the next 365 days.
In short, the youngest adults — Generation Z — are a self-confident and optimistic bunch, at least in terms of realizing the dream of homeownership. And GOBankingRates talked to several experts who have reason to believe that their optimism is more than justified.
The Gig Economy Can Save Gen Z
The old constructs about saving money and building emergency funds were shattered by the pandemic, which proved over and over that those who could weather a storm were those who had money coming in from different places.
“Gen Z young adults are more involved in the expanding gig economy than any of their predecessors,” said Cameron Miller, who ranks among the top 1% of realtors in Toronto. “Thus, they are more likely to have multiple sources of income that they can use to eventually buy their own homes.”
Yes, There’s an Inventory Crisis — But It Won’t Last Forever
There are many reasons that home prices are so high right now, but in the end, it all comes down to supply and demand. There are simply too many buyers competing for too few houses, but the market will eventually correct.
“The real estate market has its own cycles and the pessimism over homeownership largely comes from the lack of inventory that raises prices up,” Miller said. “But there is good reason to believe that this crisis will resolve itself in the next few years and Gen Z buyers could easily afford homes by then.”
In fact, the crisis is already waning in many parts of the country.
“Generation Z homebuyers should be optimistic about buying a home because we are seeing home buyer demand decrease for the first time in years,” said Jason Gelios of Community Choice Realty in Southeast Michigan. “Fewer offers are seeing competition, according to the numbers for June 2021. This makes for a promising change in the market as we start to head toward a buyer’s market.”
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Gen Z Has the Luxury of Mobility
For generations, people were shackled to jobs that were near where they lived — when buying a home, they had a shallow pool of options to choose from. Post-pandemic, however, the world is the office for many young Americans, who work from wherever they please in numbers that no other generation has ever seen before. That gives Gen Z the empowering freedom of geographic choice.
“Ever since the pandemic started, there has been an ongoing demographic shift from expensive cities like New York and Los Angeles to less costly, emerging markets,” Miller said. “Unless your life and career are inextricably linked to a specific city whose average home price happens to be above your budget, then there is very little practical reason not to move.”
Gen Z Should Be Optimistic Because Optimism Is Part of Homeownership
Buying a home isn’t easy and it’s by no means a ticket to riches or even to a middle-class life — but it is still the best tool that average people have for building wealth and security in America. And in the end, the alternative is still renting.
“Renting is no less expensive than homeownership in the long term,” Miller said. “If you have enough money to pay your monthly rent in an expensive city, then chances are you have enough money to start paying off a mortgage in a less expensive one. Homeownership will always be more advantageous in the long term, especially considering that you might want to start a family and eventually retire someday.”
Nik Shah, CEO at Home.LLC, summed it up neatly with this: “Most renters do not have access to generational wealth.”
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Last updated: July 19, 2021
This article originally appeared on GOBankingRates.com: Why Gen Z Should Be Optimistic About Homeownership