Younger buyers are helping to drive the market forward right now and shaping what we may expect to see in the years and decades to come. This includes not only Millennial homebuyers — defined as those born between 1981 to 1996 — but also members of Generation Z —anyone born after 1996.
Generation Z and Millennials: Making Their Mark on Real Estate
Younger buyers have made up the largest share of home buyers for some time. According to the National Association of REALTORS© (NAR) 2020 Home Buyer and Seller Generational Trends Report, Millennials as a whole made up the largest share of homebuyers over the past year, representing 38% of buyers. According to NAR, this marks “the seventh consecutive year the group represented the most active generation of buyers.”
Meanwhile, data from realtor.com indicates that Generation Z bought about the same percentage of the homes on the market as members of the Silent Generation in late 2019. Members of Generation Z also spent 11% more on real estate than they did during the same period for the previous year.
Market experts also predict that Generation Z homeownership will continue to climb in the years to come. A 2019 survey of more than 100 economists found that a large share of housing experts “expect the share of Generation-Z who will be homeowners in 15 years will be bigger than the share of Millennials who currently own their homes,” according to MarketWatch.
How Generation Z and Millennials are Dealing With the Current Market
Millennial and Generation Z buyers are navigating our current situation by being proactive and taking advantage of favorable market conditions — including interest rates that continue to hover near record lows.
Data from Eye on Housing, presented by the National Association of Home Builders (NAHB), indicates that 14% of Generation Z adults planned to purchase a home as of Q3 2020 — up three points from the same time period in 2019. According to the NAHB, Millennials remain the most likely of all generations to be considering a home purchase right now, at 22% — up from 20% during the same period in 2019.
Generation Z and Millennials also represent a large share of first-time buyers, according to data from the NAHB. Roughly 81% of the members of Generation Z who are planning to buy a home are first-timers, along with 64% of Millennials — significantly higher than the 45% of Generation Xers and 24% of Baby Boomers who are pursuing ownership for the first time.
Beyond low-interest rates, a few other trends are making Millennials and Generation Z uniquely equipped to navigate the current marketplace. For one thing, a large portion of Millennials are reaching what experts call the prime homebuying years — generally considered to be around 29-33 years old, the longtime median age range for first-time homebuyers.
Meanwhile, Generation Z-ers and Millennials are confident about using technology to conduct their search for a new home. 40% of buyers aged 20-29 started their search by looking for properties online, according to data from NAR; 97% of this age group said they used a website at some point in their search, with 24% saying they also used a video site and 85% saying that they utilized a mobile app.
What are Generation Z and Millennial Buyers Looking for?
COVID has provoked a major shift in buyer preferences. New priorities include energy efficiency, low maintenance fees, smart home technology, plenty of outdoor space, and convenient locations.
Despite the barriers to homeownership, Millennials still see it as a worthwhile goal and view owning a home as a chance to have control of their living space and receive increased privacy and security, compared to renting.
Generation Z has similar perspectives when it comes to homeownership. A recent study from Freddie Mac demonstrates that a significant majority of Gen Z (86%) want to own a home someday. Gen Z-ers estimate that they will be able to make their first home purchase around 30 years old, and a large share sees homeownership as a sign of success (86%) and a way to gain independence and control (88%). Gen Z-ers also have a less favorable view of renting than Millennials did at the same age.
Meanwhile, members of Gen Z anticipate sharing some of the same hurdles as Millennials, including student debt. About 65% of Gen Z say that they are not confident in their knowledge of the mortgage process, but 58% would consult with a real estate agent to learn more.
And when it comes to working with a real estate professional, a whopping 79 say that they would rather have face-to-face interactions with professionals than carry out the process entirely online, according to Freddie Mac. According to a survey from Homes.com, reported by Realtor Magazine, Gen Z-ers want to work with a real estate professional who understands their wants and needs (27.1%), is knowledgeable about the local market (18.1%), and has experience (15.2%).
That same survey also found that members of Gen Z are enthusiastic about buying homes in culturally diverse neighborhoods, and view their top priorities when choosing a place to live as proximity to work (71%), proximity to friends and family (52%), and overall location (25%).
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