What’s Behind Gen Z’s Unprecedented Homeownership Rate

This week on The Breakdown, we explore why we’re seeing Gen Z achieve higher homeownership rates than Millennials and Gen Xers at the same age—and what this means for the U.S. housing market.

A New Trend in Generational Homeownership

Gen Z, born 1997-2012, is a generation of digital natives and unmatched diversity. But when they aren't crafting personas on Instagram, YouTube, and TikTok, the oldest Gen Zers are doing something else: buying homes.

According to a CNBC article published in early September of this year, Gen Z adults (19-26 years) are outpacing their Millennial and Gen X counterparts in the homeownership race compared to when those generations were 24 years old. In fact, 27.8% of Gen Zers are already homeowners. This compares to only 24.5% of Millennials and 23.5% of Gen Xers when they were 24.

But compared to earlier generations, Gen Z has the lowest income and are unlikely to be married or have dual-income households. With entry-level salaries, unprecedented student debt, and high costs of living across many U.S. cities, how can Gen Z possible be thriving more than their predecessors in the housing market?

It turns out that Gen Z, many of whom came of age during the COVID-19 pandemic, have access to key advantages not afforded to their older counterparts. Let’s explore why.

Earlier and Smarter Savers

As many prospective homeowners would attest, saving for a down payment is no easy feat. Gen Z is taking a proactive approach, prioritizing saving and building financial literacy earlier and more consistently than previous generations.

According to Afterpay, a multinational financial technology company, Gen Z are “among the most financially savvy people in the U.S.” At least 60% of Gen Zers have a savings account, and 65% are credit active, with half maintaining a credit score above 660. Despite many still being minors, 72% of Gen Z reports feeling stressed about finances.

Gen Z households are also ahead for their age when it comes to saving for retirement. A recent Investment Company Institute survey revealed that Gen Z households have almost three times more assets in their retirement plan accounts than Gen X households did at the same age (accounting for inflation). More 18- to 25-year-olds have retirement plans than ever before, potentially due to the prevalence of 401(k)s and other plans with automatic enrollment.

For many in Gen Z, student loan debt remains the biggest obstacle to building healthy savings and investments. But while student loan debt is at an all-time high, Gen Z is managing other types of debt, like credit card debt, better than previous generations. This could be attributed to the group’s overall savings goal or the support they receive in money management: 79% of Gen Zers report that saving is their #1 goal, while 80% seek employers with financial literacy support.

How and where did Gen Z learn how to save for retirement? Access to financial literacy has never been easier, and Gen Z benefits from a wealth of technology, resources, and education that previous generations simply didn’t have. As a result, many are entering the housing market more knowledgeable about real estate and general finance than their older counterparts were. According to one Redfin Premier real estate agent in a recent press release, younger buyers adapted best during the pandemic homebuying frenzy, while older buyers struggled with the rapid changes in the market since their last purchase. Gen Z also grew up in an era when browsing listings, viewing properties virtually, and communicating with real estate agents online can all be done from the comfort of home—and on the screen of a phone.

Of course, Gen Z also receive a substantial amount of help from their families. Census data shows that more than half of adult Gen Zers live at home still, and 78% of Gen Z homeowners received help with their down payment. Yet, the attention they are dedicating to their finances is no less impressive. A combination of family support and financial foresight highlights a generation determined to make homeownership more attainable, setting the stage for lasting impact in the housing market.

Affordable Cities

The dream of homeownership isn’t possible anywhere. Gen Z is capitalizing on affordable cities in surprising places to make homeownership a reality.

For Millennials, urban areas like Boston, Seattle, and D.C. were the most attractive cities for young professionals. These cities offered the best jobs but at a high price. Homes in these cities remain expensive and out of reach for many today.

But good, high-paying career opportunities aren’t concentrated in expensive cities anymore, according to Redfin Chief Economist Daryl Fairweather in the company’s recent press release. Thanks to remote and hybrid work, Gen Z now has the possibility to buy homes in more affordable cities. With lower rent prices in smaller cities and the opportunity to work from home, Fairweather says, Gen Z can achieve homeownership much faster than their predecessors.

According to the CNBC story, these “Gen Z homebuyer hotspots” include:

• Toledo, OH
• South Bend, IN
• Lincoln, NE
• Tuscaloosa, AL
• Eugene-Springfield, OR
• Detroit, MI
• Cincinnati, OH
• Indianapolis, IN 
• St. Louis, MO
• Virginia Beach, VA

Median property values in these cities are much lower compared to the national average. Zillow’s current data confirms that Toledo’s median property value is only $121,585, South Bend’s is $181,965, and Tuscaloosa’s is $216,816. A mortgage payment for a home valued in this range could be less than rent for a similar home in the same area.

A decent salary in one of these low cost of living cities goes a long way. And given that employed members of Gen Z are more likely to have independent or multiple jobs, saving for a downpayment here is feasible for many of them.

Leveraging Pandemic-Era Mortgage Rates

Another crucial factor working in Gen Z’s favor for homeownership is historically low, pandemic-era mortgage rates. In 2021, during the COVID-19 pandemic, the average 30-year fixed mortgage rate hit a record low of 2.96%. For many young Gen Zers, this unprecedented rate made homeownership more accessible than ever. A $200,000 home, with such a low interest rate, became a manageable option for older Gen Zers with good incomes. Many of these buyers were able to save by living at home or benefited from family assistance with their down payments, allowing them to take advantage of this unique financial window.

But the window didn’t last long. As the housing market began to recover post-pandemic, mortgage rates steadily increased. By 2023, mortgage rates had surpassed 8%, putting a renewed strain on all homebuyers. This shift has led to a stagnation in the homeownership rate for Gen Z.

The contrast between 2021’s favorable rates and the current ones highlights just how significant that dip ultimately was in helping some of the youngest buyers enter the market. For those fortunate enough to lock in low rates during this period, homeownership became a reality much sooner than it might have otherwise.

What about Millennials?

While Gen Z is making headlines for their homeownership rates, Millennials still represent the largest group of home buyers at 38%. They have now overtaken Baby Boomers, whose share of home purchases has declined in the last year.

A continued challenge for Millennials (and Gen Z) is a shortage of affordable starter homes. Many Millennials have waited a long time to be homeowners, and for some buyers, they can finally afford it. In fact, some Millennials have had to wait long enough that nicer, luxury properties are their first homes.

Millennials also want affordable homes close to work, with almost half looking to live in the suburbs rather than large cities or rural areas. This preference for suburban life reflects the same remote working trends we see in Gen Z, as virtual employment spaces reshape how and where people choose to live.

But even with a strong presence in the market, many Millennials—especially those who have been in the market a long time—are closed out by high interest rates. Record high rates and a severely limited inventory are barriers few can cross without high income, downpayment support, and a low cost of living. With inflation cooling and the Fed’s recent interest rate cut, however, Millennials—and Gen Z—are holding out hope for an improved housing market.

What’s Next for Gen Z in the Housing Market?

Gen Z isn't immune to the challenges of today’s housing market. Like other prospective homebuyers, they face high interest rates, low affordability, and limited inventory.

It’s likely that Gen Z’s higher homeownership rates compared to previous generations comes down to a mix of good timing and greater access to financial know-how. The pandemic’s historically low mortgage rates gave some of the oldest Gen Zers a perfect window to buy, aided by factors like affordable living options and increased access to financial education.

As Gen Z ages and more of its members enter the market, their impact on the housing market landscape remains to be seen. Gen Z is equipped with unparalleled access to the tools and technology to help them navigate homeownership like no other generation has. But only time will tell how well they harness these tools in an evolving market.