Gen Z Is Up Against Millennials for Housing
Many millennials are entering homeownership later in life, leaving both generations looking to buy in a market largely devoid of entry-level options, analysts say.
SANTA CLARA, Calif. – The oldest members of Generation Z are entering their homebuying years, but they’re finding steep competition from millennials for a dwindling supply of entry-level homes.
“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,” says George Ratiu, realtor.com’s senior economist. “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.”
Forty percent of Gen Z members surveyed in 2018 said they wanted to own a home by age 25, according to research from realtor.com. They are starting to enter the marketplace: The median price of a home purchased by Gen Z buyers is $160,600, lower than $256,500 for millennials, but it is growing more quickly, realtor.com notes in its Fourth Quarter 2019 Generation Propensity Report.
However, the inventory of homes priced below $200,000 has plummeted by 18.1% annually, according to realtor.com’s data. Gen Z has increased their median purchase price by 11% over the past year.
Gen Z is targeting smaller Midwestern and Southern markets that tend to be known as being more affordable. For example, the top three metros where Gen Z had the largest share of homeownership are Toledo, Ohio; Grand Rapids, Mich.; and Wichita, Kan.
Nevertheless, “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,” Ratiu says. “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.”
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