Generation Z is a huge part of the U.S economy. This is the generation that comes after Millennials, born between 1995 and 2005. Although still quite young, Generation Z is already contributing up to $44 billion each year to the U.S. economy.
A study by Property Shark shows that Generation Z, also known as iGen or the Instagram Generation, is more optimistic about owning a home. Many are even planning to buy houses within the next five years. According to findings, at least four out of five interviewees plan on buying homes in the next five years despite their massive student debt.
Generation Z is more optimistic about buying homes than Millennials. Millennials aspire to own a 1,883 square-foot home. In reality though, they can only afford something around 812 square feet. On the other hand, Generation Z aspires to own a 2,081 square foot home. What they can really afford is around 803 square feet.
Most of the iGen respondents said that they were not willing to compromise on the square footage they get when they buy a house. This could be because Gen Z grew up in bigger houses than their predecessors, and very few of them ever had to share a room.
The encouraging thing about this study is that these young adults are not all talk. The study shows that at least 100,000 of iGen members already own property despite being so young.
Key Takeaways from the Study
The study covered more than the home purchasing habits of the Instagram Generation. It shed light on a few things about previous generations as well:
- Generation X is more likely to choose inter-generational living patterns and to care for relatives from other older generations.
- Generation Z will compromise on almost anything as long as it cuts costs. Space however is extremely important so they are less likely to compromise on this when buying a house.
- Generation Z is a threat to Millennials in the real estate market so they are poised to present competition for good housing.
So, what exactly is driving this stiff competition from the younger Generation Z?
Differences Between Generation Z and Millennials Over Housing
We see that Generation Z is willing to compromise on most things except space. But what is it about this generation that makes them so eager to buy homes?
- They don’t care that much about amenities: Generation Z’s only major concern is space. They are willing to give up almost anything else including access to parks or a yard, and even a shorter commute.
- They are okay with buying a fixer-upper: this is probably one of the main reasons why many of these young adults are buying houses. The study shows Generation Z is more willing to take on fixer-uppers that sell for a lot less. The study also showed that almost half of all Generation Z home buyers make less than a $10,000 down payment.
- They saved for less than five years before buying their homes: 93% of the respondents who already owned homes said that they saved for less than five years to make their down payments. A possible explanation for this unprecedented speed is that this generation tends to gravitate more towards cheaper homes than Millennials. That makes it easier for them to save faster for the lower down payments required. Additionally, they get a lot of help from their parents with these down payments.
- They buy homes despite student loan debt: the burden presented by student loan debt seems to be a multi-generational problem. The iGen and Millennial generations cited it as a major hindrance to their home buying ambitions. Generation Z, however, is more willing to take on both burdens at the same time.
The survey also shows that most people want to own homes. The problem is that there are several stumbling blocks. These obstacles come in the form of heavy loans, credit card debt, and hefty down payments. These obstacles keep most members of these generations locked into the rental market for much longer than they would like.
This issue particularly affects Millennials. The study shows that half of Millennials (born between 1980 and 1994), are still renting.
On a brighter note, most Americans remain optimistic about their prospects of owning a home in the near future. Almost 80% of the respondents said they expect to buy a house within the next five years (this include respondents from Gen X to Gen Z).
What Makes Generation Z So Special?
Several key factors make Generation Z members stand out:
- They are more likely to have several sources of income because of the rising gig economy.
- They are early starters. This means they are more likely to go straight into the workforce at the age of sixteen.
- They are more entrepreneurial, meaning they are more likely to make the money they need quicker.
- They are more likely to look into more affordable housing markets.
Generation Z is far more optimistic than their counterparts so they have higher expectations than Millennials. This generation is more open to taking chances than their predecessors, giving them an edge in the housing market.