With the oldest members of Generation Z finally entering their homebuying years, many of them are facing tough competition from older millennials in a market struggling with a serious shortage of entry-level homes for sale.
“Gen Z is entering the housing market under the radar, but at a projected 65 million strong, they are going to begin making some major waves,” George Ratiu, realtor.com’s senior economist, noted in a recent article. “However, as the young generation launches into homeownership, it is facing strong headwinds, including competition from millennials, many of whom are entering homeownership later in life, and a marketplace largely devoid of entry-level options.”
Some 40% of Gen Zers said in a 2018 survey they intend to become homeowners by age 25, according to realtor.com. And those people are moving rapidly into the marketplace. The median price of a home purchased by Gen Z buyers is $160,600, lower than $256,500 for millennials, but it is growing more quickly, realtor.com’s Fourth Quarter 2019 Generation Propensity Report notes.
But the problem is that available inventory of homes priced below $200,000 is extremely tight, having fallen by 18.1% in the last year alone. Moreover, Gen Zers have only increased their median purchase price by 11% in the last year. They tend to target homes in the smaller Midwestern and Southern markets where properties are generally more affordable.
Still, Ratiu said he was optimistic about the overall trend at least.
“With major generational transitions taking place across a housing landscape clouded by lack of new construction and a shortage of inventory, young Americans' preference for homeownership is a ray of sunshine," he said.
“It stands in contrast to the rhetoric of the past decade, cataloging young people as the 'renter generation,' and provides ample evidence that a significant ramp-up in affordable new home building is needed to meet the growing demand."