9 Reasons (Aside from Mortgage Rates) Why Gen Zers Won’t Be Buying a House Anytime Soon

LOANS - MORTGAGE & LOAN NEWS
High interest rates aren’t the only reason many Gen Zers aren’t ready to take on a mortgage.
Updated April 21, 2023
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A frustrated homeowner

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Even among millennials who are doing financially better than most other Americans, millennials have the lowest rate of homeownership out of any generation in modern history.

That trend of declining generational homeownership is likely to continue with Gen Z, a demographic designation that refers to those born between the late 90s and early 2010s.

In 2022, the average first-time American homebuyer was 36 years old — so most Gen Zers (aka zoomers) are still a long way out from considering homeownership.

But once they start turning 30 in the next few years, you shouldn’t expect to see a surge in Gen Z home-buying for the foreseeable future.

Here are nine factors standing in their way of home ownership.

Escalating college costs

Burlingham/Adobe college graduate with large tuition bill

According to data from 2021, the average college-aged zoomer could expect to pay a total of $90,875 to attend a typical public university.

In contrast, the average baby boomer spent $39,780 (in today’s dollars) for the same four-year degree.

Without the extra financial burden of nearly $100,000, it’s no wonder 68% of boomers were able to own their own homes by age 40. The same thing is unlikely to be true for Gen Z.

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The return of college loan payments

Nicholas Felix/peopleimages.com/Adobe thinking woman reading student loan information

When the COVID-19 pandemic struck, the federal government hit pause on collecting monthly student loan repayments.

As a result, most members of Gen Z likely haven’t made student loan payments regularly for most of their adult lives. Debt payments will likely resume 60 days after June 30th of this year.

The resulting strain on new graduates’ budgets could be another financial setback for zoomers who hoped to buy a house in the next few years.

Recession fears

Feng Yu/Adobe Recession

While the United States hasn’t fallen into a recession (at least, not yet) recession fears have been circulating since at least last summer.

Economic uncertainty and anxiety about the future might make it hard for anyone to make a financial commitment with long-term consequences, such as taking on a 30-year mortgage.

Uncertainty about student loan forgiveness

terovesalainen/Adobe counting college savings

The country is still waiting to hear back from the Supreme Court if President Biden’s student loan forgiveness program will proceed as planned.

Even if it does, graduates only qualify for forgiveness if their income doesn’t exceed a set threshold. What’s more, the maximum amount of debt they can have forgiven is only $20,000.

For students who took out up to $100,000 in student loans, that $20,000 might not make much of a difference in moving them closer to the debt-to-income ratio mortgage most lenders want.

Soaring rent prices

DoubletreeStudio/Adobe notice of rent increase on table with pennies, calculator, and keys

In May of 2022, the median rent payment had gone up by more than 26% compared to the year before the pandemic.

Unfortunately, those numbers aren’t likely to go down anytime soon: Rising rent prices could continue through most of 2023, if not longer.

Naturally, with a larger percentage of their income going toward rent (and, eventually, student loan payments), it’s even harder for renting zoomers to save up for a down payment.

Unreliable gig income

twinsterphoto/Adobe Woman recording live makeup tutorial

In 2021, 16% of all U.S. adults had held a gig job — a number that includes 30% of all individuals ages 18 through 29.

Ideally, supplementing a full-time job with a side gig would make it easier to own a home. But because they’re flexible, gig jobs can be unreliable, making budgeting for a house even trickier.

After all, it’s hard to figure out if you can afford a mortgage when you don’t know what your income will be from month to month.

The pandemic put education and career plans on hold

Wayhome Studio/Adobe young housewife wearing shirt at home studying gas and electricity bill

Many zoomers were about to graduate from high school, enroll in college, get a job, or choose a career when the pandemic hit.

As a result, Gen Zers had to alter their immediate plans for the future to accommodate a radically changed world.

For some, that might have meant putting off college applications for another year or moving home after losing their first job out of college.

The delay in entering school or the workforce caused a financial setback that could set Gen Zers’ budgets and savings back a few years.

Fear about the future

Paolese/Adobe woman sitting at table with laptop unhappy about bills

The pandemic, war, climate change — the unexpected twists and turns of the last few years have made the future seem more uncertain than ever for most people, regardless of age.

After such a tumultuous time, setting long-term goals (including financial goals) might seem pointless.

They grew up in economically unstable households

DragonImages/Adobe service man writing on a contract with a woman standing beside him inside a kitchen.

After the housing market crashed in 2008, 10 million Americans eventually lost their homes. For many, losing their home was the consequence of losing their job.

The youngest members of Gen Z were around nine or ten in 2008, which means many zoomers grew up in households where parents lost jobs or the family lost housing. The experience could make Gen Z kids more inclined to be house-averse adults.

Bottom line

gstockstudio/Adobe young woman explaining work to senior boss in office

Gen Z’s home-buying trends impact the housing market for everyone. So whatever your age, the reasons Gen Zers aren’t buying homes at the same rate as other generations affect everyone.

It’s doubly important to consider these reasons if you plan to jump back into the real estate market (for instance, to sell your house in a few years if you retire early).

The more you understand market dynamics and demographic buying trends, the better you can plan for your own housing future.

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Author Details

Michelle Smith Michelle Smith has spent a decade writing for and about small businesses. She specializes in all things finance and has written for publications like G2 and SmallBizDaily. When she's not writing for work at her desk, you can usually find her writing for pleasure near large bodies of water.

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