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."