It’s baby boomers’ housing market, the rest of us are still trying to catch up. That’s the message from a striking chart posted along with a new analysis from Redfin, comparing the last four generations’ experience of homeownership at comparable ages.
See the green line and how it looms above every other, even Gen X? That just shows that after a somewhat slow start, boomers were able to buy homes—and keep buying them—at rates that just haven’t been matched by younger generations going back three decades now. But there is a surprise with a seemingly fast start from Gen Z. While homeownership rates for the younger generation stagnated last year, Redfin notes, a majority of adult Gen Zers are “outpacing young people of the past.”
More than 26% of adult Gen Zers owned a home last year, and as Redfin’s data journalist and senior economist, Lily Katz and Sheharyar Bokhari, note in the analysis, the Gen Z category only includes those that are 19 to 26 years old. As for why it may be that the homeownership rate remained relatively unchanged from the prior year, the authors cite mortgage rates that hit a more than two decade high and home prices that remained high, despite already rising substantially during the pandemic-fueled housing boom.
“It was an especially hard year to buy a home,” they wrote, adding later, “it was particularly difficult for America’s youngest homebuyers, many of whom are just starting their careers and don’t have significant savings or wealth from the sale of a previous home.”
And yet, the younger generation seems to have a good head start. For one, homeowner rates for adult Gen Zers are higher than those for millennials and Gen Xers when they were the same age; that age being 19 to 25 years old. “For example, the rate for 24-year-old Gen Zers is 27.8%, compared with 24.5% for millennials when they were 24 and 23.5% of Gen Xers when they were 24,” the authors of the analysis wrote.
The assumption made in the analysis is that many Gen Z homeowners bought during the pandemic, when mortgage rates were at historic lows compared to millennials, who in their early twenties struggled to find work, and afford a home, given the time period: the Great Recession. Or Gen Xers, who in their early twenties were dealing with extremely high mortgage rates—as Redfin points out, mortgage rates were around 11% toward the end of the 1980s, which is when the oldest Gen Xers were 24.
But as always, there’s a slight catch.
“Some young first-time buyers are also coming in with financial help from family, or co-buying with family members, which boosts their buying power,” Jon Byram, a Northern Virginia-based real estate agent, said in the report. “And some have savings because they’ve been living with their family rent free.”
Although the same agent said Gen Z homebuyers are financially savvy, in that they’ve done their research and are entering the housing market more educated than previous generations. “My youngest buyers handled the pandemic homebuying frenzy the best,” he added.
Still, 26-year-old Gen Zers aren’t ahead; they’re the only ones that are tracking behind prior generations, despite the fact that they were the oldest in the generation last year. Their homeownership rate was 30%. At the same age, the homeownership rate for millennials was 31%, for Gen Xers it was 32.5%, and for boomers it was 35.6%, according to Redfin. The authors of the analysis, Katz and Bokhari didn’t explicitly mention why that is, but they did note that younger Gen Zers (who weren’t included in the report) “are more likely to track ahead of older generations because many of them are receiving financial help from family members, while many older Gen Zers are being weaned off of their parents’ wallets.”
Not to mention affordability is set to improve slightly this year. Redfin’s chief economist, Daryl Fairweather, projected home prices would fall 1% year over year in the second and third quarters of this year and mortgage rates would decline to 6.6% by the end the year, in a forecast released in early December. Maybe that’ll mean more good news for Gen Zers, but it’s unlikely boomer domination is coming to an end any time soon.
“Housing affordability remains strained, but things are looking up for Gen Z,” Fairweather said in the new analysis. “The recent decline in rents means Gen Zers can put more money toward saving for a down payment. Plus, the job market is strong, and career opportunities have become less concentrated in expensive cities during the remote work era, meaning many Gen Zers can choose to live somewhere more affordable.”
