With every new generation that comes of age, all economic sectors see some significant changes. Real estate is no exception, as both rental and homeownership markets reflect these generational shifts in preferences and purchasing power. A study by PropertyShark recently looked at the differences between Gen Zers, Millennials, and Gen Xers when it comes to homeownership and saving for a down payment. The real estate data provider website surveyed over 2,000 U.S. renters, owners, and people living with family belonging to the three generations, including only Gen Zers over the age of 18.
Millennial and Gen Z renters think of buying, but high prices and debt limit optimism
Although Gen Zers are just starting to enter the real estate market, they are quickly becoming decision-making customers with a determined attitude. As many as 83% of Generation Z survey respondents stated that they’re planning to buy a home in the next 5 years.
According to data gathered from respondents of all three generations, 50% of Millennials and 50% of Gen Zers are renting, while only 29% of Gen Xers do so. Whether they are happy with the present living status or not, over 80% of respondents from each generation said they plan on buying a home in the next 5 years. Millennials are the most ambitious, with 87% of them thinking of becoming homeowners. The question is how many of them can actually afford to do this.
The more experienced Gen Xers said that saving for the down payment is the biggest obstacle towards buying a home, followed by their credit scores. Millennials share this view, having a hard time saving up mostly because of college debt, their number two impediment. Gen Zers, still very young, think that student debt is their number one problem, probably a result of witnessing the similar hardships Millennials have been going through. Not being able to save enough money has gotten Millennials stuck in the role of renters, which has pushed the rental rates to a historical high.
Their own expectations regarding the cost of the down payment show that Millennials are the most pessimistic of the generations, on average expecting a $41,000 down payment. Gen Zers and Gen Xers, on the other hand, have similar outlooks, expecting to put down $37,000 and $36,000, respectively.
Home prices are on the rise and having to save for a down payment while also paying rent and having other financial responsibilities is tough. The survey respondents admitted that when it comes to saving money, most of them have little to no money set aside. Around 40% of respondents from all three generations said they have less than $10,000 saved, whereas 17% of Gen Xers, 15% of Millennials, and 19% of Gen Zers have nothing saved for a down payment.
The top reason for living with parents is not being able to afford rent
39% of Gen Zers live with their parents, while this figure is 14% for Millennials. Only 4% of Gen Xers stated they live with their elders, with over one-fifth of these stating the reason for doing so was in order to provide care. Both Millennials and Gen Zers want to save up money for when they move out, yet the top reason for living with their parents for Gen Xers and Millennials is simply not being able to rent by themselves, let alone buy. On the other hand, for Gen Zers, the top reason is to save up for a down payment.
When asked about the living situation they will choose when moving out, 70% of Millennials and 80% of Gen Zers plan on renting, either by themselves, with their partner, or with friends. It seems that despite wanting to be homeowners, renting is the practical solution for the young generations. This is likely to create a lot of competition on the rental market, with higher monthly rents being the probable result.
For this study, PropertyShark surveyed 2,134 U.S. renters, owners and people living with family via Amazon’s Mechanical Turk. The respondents were asked individual questions about savings, home ownership, amenity and community preferences, as well as some demographic data such as employment and marital status.
They defined Gen X as those born before 1980, Millennials as those born between 1981 and 1994, and Gen Z as those born between 1995 and 2010. All survey respondents were over the age of 18. As such, Gen Z respondents only include those born between 1995 and 1999.