Generation Z, 18- to 24-year-olds who are entering the age bracket for first-time home buying, is the first generation in American history with a preference for buying homes in culturally diverse neighborhoods, according to a recent Homes.com survey.
Polling more than 1,000 young adults in the Gen Z age bracket, the survey is the first to examine how Generation Z and millennial habits differ across several facets of home buying.
The survey found that 58% of future Gen Z home buyers prefer a diverse community compared to 12% who prefer a homogeneous neighborhood. Gen Z's commitment to diversity has important ramifications for national housing policy, cross-cultural enrichment, and the evolution of a post-racial definition of the American Dream.
"Generation Z is more multicultural than ever before, with demographics that include the largest percentage of Hispanics and non-Hispanic blacks at 22% and 15%, respectively. Our survey suggests that their preferences will have a substantial impact on home-buying patterns," said David Mele, president of Homes.com. "That, in turn, may create a new dynamic where diverse communities thrive more than ever before."
The Gen Z homeownership survey also found that:
- The vast majority of Gen Z-ers expect to buy a home. 86% of respondents reported they plan to become homeowners someday. Only 5% don't, and the remaining 9% are unsure. Since Gen Z is even larger than the millennial generation, strong home demand can be expected for many years to come.
- Most expect to buy their first homes before age 35. Specifically, 14% anticipate purchasing homes between ages 18-24, 48% from 25-29, and 25% between 30-34. If they succeed, they will follow the same schedule as Generation X and Baby Boomers. They will also achieve a much higher homeownership rate than millennials, who were stymied by high unemployment and low-income levels for young workers from 2008 to 2013.
- 'A place to call home' and investment value are among the top reasons to buy. The fact that half want to buy because they believe owning a home is a good investment reflects how far the wealth-building aspects of homeownership have rebounded since the housing crash of 2008 when less than 1% of first-time buyers said financial security was their primary purchase motivation. Having a good home for pets ranked as the #3 reason to buy, outstripping safety and a sense of community as key incentives.
- Proximity to work is Generation Z's top priority in selecting a place to live. When asked to rank the most important considerations in deciding where to live, proximity to work (71%) as well as to friends and family (52%) surpassed urban location (25%), proximity to shopping (24%) and access to nightlife (12%). That means that employers located in suburban and ex-urban areas will find it easier to attract Gen Z employees.
- Four in 10 are concerned they won't earn enough to qualify for a mortgage. Even though most are years away from buying a home, Generation Z is more worried about making enough income to afford a home in five or 10 years than about their ability to save for a down payment or pay off student loan debt.
- Gen Z-ers have misconceptions about down payments. Despite the availability of lower-cost down payments like those required with 3.5% FHA loans, many young home buyers believe they will need to save for two or three years to meet down payment obligations unless they get financial help from friends and family. That scenario is unlikely unless they live in an expensive market or don't use a low down payment loan.
"With Gen Z poised to become the next wave of home buyers, it's important to look at how their attitudes and behaviors will affect the home-buying process," Mele noted. "The insights provided by this survey can help agents anticipate and prepare for the changes that will occur as this age group begins their home search."
