How Gen Z’s Approach to Real Estate Could Impact the Housing Market

According to an annual report from the National Association of Realtors (NAR), first-time home buyers were responsible for 32% of all home purchases in 2023, up from 26% the prior year.

However, first-time home buyers had a median age of 35, which indicates that people are waiting longer to enter the real estate market. Per data shared by the Washington Post , home prices have shot up 54% since 2019, making housing unaffordable for someone fresh out of college.

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With real estate prices increasing over the last few years, many younger people have accepted that purchasing a home won’t be at the top of their priorities. The combination of high interest rates, low inventory and elevated prices means that members of Gen Z may not be as interested in becoming homeowners.

We will review Gen Z’s approach to real estate and the possible implications on the housing market in the future :

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Gen Z’s Approach to Real Estate

According to recent data from NeilsenIQ, Gen Z is less interested in buying homes and having children. Instead, Gen Z is more focused on finding fulfilling careers and traveling. With the youngest members of the generation reaching their twenties in the next ten years, there’s a belief that they may delay monumental first steps like marriage and homeownership.

The study found that Gen Z will make up 30% of the global workforce by 2030, so how they spend their money will have a major impact on the economy. Although the spending habits of Gen Z will likely mirror those of millennials, the generation is more likely to be value-focused shoppers due to the economic conditions that they grew up in.

According to the 2023 National Association of Realtors Home Buyers and Sellers Generational Report , Gen Z made up 4% of home buyers in 2022 and purchased the smallest properties (under 1,500 square feet). It’s also worth pointing out that 30% of Gen Z home buyers went directly from living with their parents to home ownership.

This generation also valued buying a home in a location that was close to friends and family.

How This Could Impact The Future of The Housing Market

How could Gen Z’s spending habits and personal finance philosophies impact the housing market?

Home Ownership Could Be Different

“I think at present Gen Z may not be interested, but as they grow older or seek ways to build wealth, the interest in real estate may surface,” said Nikki Beauchamp, an associate broker at Sotheby’s International Realty . “It may look different, but there might be much more interest in partial ownership or owning with friends.”

While most people traditionally purchase a home for their families, younger people might take a unique approach to real estate. A recent survey from JW Surety Bonds found that 15% of Americans have already purchased a home with a friend who’s not a romantic partner, and another 48% were considering it. Gen Z was the most willing to co-purchase a home with a friend with 70% admitting that they would embrace the idea.

When it comes to unconventional home ownership options, Gen Z may also be more inclined to participate in house hacking , which involves renting out a portion of the space for additional income streams. Based on data from Zillow , over half of Gen Z survey participants had favorable views on house hacking to combat affordability issues.

This means that younger buyers could be in the market for a home with a separate rental unit or looking for properties they could buy with friends. Real estate agents will have to adapt, and homes may have to be built with the option of a separate rental property.

Gen Z Will Look For Unique Features In a Home

“Gen Z puts things like economic parity, environmental sustainability and is more of a people-first generation rather than being hung up on status,” said Omer Reiner, a licensed realtor and president of FL Cash Home Buyers, LLC . “So it stands to reason that Gen Z will look for features in a home that match their concerns about the environment, such as solar panels and more sustainable water systems and appliances.”

Gen Z may have unique expectations from homes that previous generations didn’t have. According to Realtor.com , Gen Z home buyers are looking for homes with multi-purpose spaces. As the generation grew up working remotely, they may prioritize private spaces and rooms that offer the opportunity to work in peace.

Reiner also noted that bigger isn’t always better for Gen Z, as this generation values functional spaces over square footage. Younger home buyers may be on the lookout for features that weren’t as important to a previous generation.

Gen Z Will Prioritize Lifestyle Over Owning a Home

“As this generation matures, they’ll finalize their career paths and discover cities, people, and opportunities that will shape their early adult lives,” said Sam Morgan, a managing broker at Engel & Volkers Atlanta . “I don’t believe it’s a question of whether Gen Z will become homeowners, but rather what type of home they desire, coupled with the lifestyle they seek.”

Gen Z may not be in a rush to settle down and purchase a place so that they can become homeowners like other generations did.

They may prioritize lifestyle as they seek to be around the community and involved in careers that they’re passionate about.

The Find World On Future Impact On The Housing Market

“I think it’s important to remember that only three or four years of this generation are reaching an age when homeownership is something they may be considering as the majority are still in high school and college.” Morgan said.

While the stats on Gen Z and home ownership paint the picture that the generation isn’t overly interested in real estate, the key consideration to remember is that many members of this demographic are simply too young to enter the housing market, as they’re still in school.

Only time will tell how Gen Z responds to the real estate market as they all enter the workforce and start saving up for the first time.

This article originally appeared on GOBankingRates.com : How Gen Z’s Approach to Real Estate Could Impact the Housing Market