New survey results from Freddie Mac reveal Generation Z, or the demographic cohort following millennials, has a largely positive outlook on the idea of homeownership, though they are increasingly leery of the obstacles they may face.
One in three Gen Z adults (34%) say homeownership at any point seems out of reach financially, which rises slightly to 35% of Black respondents and 50% of Hispanic respondents. When this survey was last fielded in 2019, 27% of Gen Z adults said homeownership is out of reach financially.
“Currently in the housing market, we’re seeing rising mortgage rates, insufficient supply, and elevated house prices bringing about significant affordability challenges,” says Pam Perry, single-family vice president of equitable housing at Freddie Mac. “Gen Z has taken notice, and their hopes of homeownership have waned as the potential issues they may face in purchasing a home have become front and center.”
According to the survey, Gen Z adults prefer homeownership over renting and believe owning a home allows more flexibility to design it the way you want (96%), provides more privacy (96%), is something to be proud of (95%), and allows for more control and independence (92%).
On the other hand, Gen Z adults also acknowledge the benefits of renting. They cited flexibility (76%), being close to the “action” (65%), and less stress than owning (63%) as the top pros of renting.
Although Gen Zers are confident in knowing the responsibilities associated with homeownership, their knowledge of the home buying process is weaker. Seventy-two percent say they know a homeowner’s responsibilities, but only 47% have knowledge of the buying process.
The generation’s top five hurdles to buying are saving for a down payment (39%), not having a sufficient credit history (27%), unstable job situation (27%), student loan debt (22%), and credit card debt (11%).
Currently, 72% of the generation live with their parents, with the majority (42%) expecting to move out between ages 23 and 25. When they do move out, 51% expect to dedicate 26% to 50% of their income to housing.
As they prepare to take on additional financial responsibility, the survey shows that they have role models who demonstrate good money management. Eighty-nine percent of Gen Z include their parents as one of their top three most influential on views of money and a go-to resource for financial advice.
Unfortunately, however, Black Gen Zers lag on early financial education, while Hispanic Gen Zers are more inclined to worry about family finances. Still, unlike their White peers (43%), these groups are optimistic that they will fare better than their parents (68% of Black respondents and 58% of Hispanic respondents).
“Freddie Mac has been following this emerging generation closely and leading the industry to help solve for potential challenges that this group may face," adds Perry. "Freddie Mac is doing this with efforts like low down payment mortgage products, credit building initiatives, and our financial capability curriculum, CreditSmart.”
