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The stars look set to align for Generation Z, which appears to be destined to become homeowners at a higher rate than millennials.
A survey of more than 100 economists conducted by real-estate company Zillow ZG, +1.60% and research firm Pulsenomics found that a plurality of housing experts expect the share of Gen-Z who will be homeowners in 15 years will be bigger than the share of millennials who currently own their homes. (Pew Research Center defines Generation Z as roughly anyone born after 1996, so they’re now 23 and younger. Millennials were born between 1981 and 1996, so they’re now between 23 and 38, according to Pew.)
As millennials have aged into what have traditionally been the prime years for buying a first home — between 35 and 44 years old — the homeownership rate among that age group has fallen. Between 2009 and now, the share of 35- to 44-year-olds who own their homes has dropped from 66% to 60%. During that same period, the overall homeownership rate rose to nearly 65% after hitting a low of roughly 63% in 2016.
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When Gen Z reaches this same age in 15 years, 45% of the economists polled believe that more than 60% of them will be homeowners. Another 20% believe the homeownership rate will be the same across the two groups, while 35% believe it will be lower for Gen Z.
Economists cited a range of reasons for why Gen Z appears to be on track for higher levels of homeownership. The inventory crisis that’s currently plaguing the housing market — making it incredibly difficult to find a home to buy in the first place, let alone an affordable one — is expected to resolve itself in the next decade.
Additionally, economists projected that Gen Z will be more inclined to live in more affordable areas (versus millennials who are largely drawn to more expensive, urban locales.) Timing is another factor: The oldest subset of millennials graduated from college right as the economy went into a recession, which has presented career- and income-related hurdles that have delayed other life milestones.
Gen Z, on the other hand, is coming of age during an upswing in the economic cycle and benefitting from that.
Nevertheless, members of Gen Z will face some obstacles in their path toward homeownership. For starters, Zillow Z, +1.49% noted that student loan debt could continue to be a major burden for them, barring any major policy changes. Furthermore, home price appreciation could continue to outpace wage growth, and people’s preferences could in turn shift in favor of renting overall.
