Why Gen Z Faces Homeownership Anxiety in Today's Volatile Economy And How They Overcome It

Generation Z, also known as “Zoomers,” has seen the dawn of an over-inflated economy, sky-high unemployment rates, an ever-changing housing market, a global pandemic, and some of our nation’s most contentious presidential elections. The generation full of our next young adults is forced to acclimate to a society and economy that’s becoming more difficult to live in by the day. From “adulting” to merely surviving, homeownership can seem like a distant goal to a large part of Gen Z.

COVID-19 was the catalyst of our nation's inflated economy and had a similar effect on Gen Z that the 2008 financial crisis had on millennials. Being brought up in a fully digital world, most Zoomers were raised in a different financial and technological climate than millennials.

While there are plenty of similarities and differences between the spending and saving habits between the iGeneration and millennials, young adults were handed the short end of the stick, as they trudge through a financial climate where economic instability and high costs of living challenge their aspirations and financial security more than any other generation.

Unlike previous generations, Gen Z is faced with navigating record-high housing prices while juggling significant burdens of student debt as tuition prices continue to rise. All of this makes traditional markers of success, like homeownership, a much more elusive concept. While these hurdles pose a significant challenge for the generation, they still manage to adapt to the current financial climate and overcome each obstacle.

General Corporate Distrust

Of all the generations, Gen Z is the least trusting of larger institutions, according to a recent study from Gallup and the Walton Family Foundation. This lack of trust largely starts with our government and corporate America, extending to other organizations such as the real estate market and news media.

In the past decade alone, events like the housing crisis, gentrification, displacement, affordable housing shortages, and discrimination in housing policies have led Zoomers to doubt our nation's ethics and initiative to fix the overall housing crises in America. Gen Z perceives the government’s lack of accountability surrounding breaking down housing inequalities and questions our nation's regulatory practices on real estate markets.

COVID-19 impacted Gen Z more than any other age group, as most of them were still in middle- or high school with a year of their education taking place virtually. This experience deprived the generation of key social skill development – skills often needed throughout the home buying process.

Purchasing housing accommodations comes with needing to trust many figures: real estate agents, landlords, appraisers, inspectors, etc. Widespread corporate distrust and social deprivation from COVID-19 make these relationships harder to develop for the emerging young adults. Viral hashtags like #HousingCrisis and #RentTooHigh are mechanisms of humor that Gen Z uses to cope while amplifying their collective voice against surging rent and mortgage costs.

Financial Literacy  

The iGeneration is one of the least educated on financial literacy per GOBankingRates. In fact, each generation is reportedly less confident in their financial knowledge than the last. Zoomers have been forced to adapt under extreme change countless times during childhood, leading them to foster more of a fast-paced mindset, typically only interacting with certain resources once they begin to affect them. While the tides are slowly beginning to turn for Gen Zers still in high school, financial literacy isn’t something in a traditional high school or college curriculum. 

The young adults have a primarily digital relationship with their finances. Resources like banking apps, Apple Pay and Zelle make it more difficult for Zoomers to understand the hands-on initiative needed to build and maintain a strong financial profile.

The consequences of these issues are exhibited in the generations’ spending and saving habits. According to a recent survey from Bank of America, 66% of the generation has begun saving money in some capacity, while 43% have already been burdened by debt (credit card, car, or student loans).

According to a TransUnion^® study called “Solving for Z,” Gen Z is starting their credit journey later than millennials did, likely due to their lack of financial confidence. Millennials, on average, started building credit at 18.9 years old, compared to 19.1 for Generation Z. Adults younger than 27 are incurring debt at a faster rate than their predecessors, a direct result of lacking financial knowledge.

With home prices and the cost of living skyrocketing in many areas, homeownership seems increasingly unattainable for many young people who don’t have substantial savings or high incomes. They also may be managing their other sources of debt, making it even more difficult to support a new financial endeavor such as a mortgage or any form of housing.

However, there are many resources to help change Gen Z’s destiny. Schools in some states offer personal finance courses that often teach students about budgeting and financial goal setting.

For our more digitally native Zoomers, there are hundreds of online personal finance/financial literacy courses available for free and for purchase. Khan Academy and Udemy are great places to start. The Consumer Financial Protection Bureau (CFPB) and MyMoney.gov are government websites offering financial education resources. There are also numerous podcasts, apps, YouTube channels and books that Gen Z can utilize on their journey to financial stability. Here are just a few.

Apps

• Rocket Money: Helps users track their spending, set financial goals, and manage their finances.
• YNAB (You Need A Budget): Teaches users how to budget effectively and build financial habits.

Books

• "Rich Dad Poor Dad" by Robert T. Kiyosaki: Offers insights into financial independence and investing.
• "The Total Money Makeover" by Dave Ramsey: Provides practical advice on budgeting, saving, and getting out of debt.
• "Your Money or Your Life" by Vicki Robin and Joe Dominguez: Discusses transforming your relationship with money and achieving financial independence.

YouTube Channels

• Graham Stephan: Offers advice on real estate, investing, and personal finance.
• The Financial Diet: Provides tips on budgeting, saving, and financial planning.
• Andrei Jikh: Focuses on investing, credit, and personal finance strategies.

Podcasts

• The Dave Ramsey Show: Covers topics like debt reduction, budgeting, and personal
  finance.
• Planet Money: Explains economic and financial concepts in an engaging and understandable way.
• BiggerPockets Money Podcast: Discusses personal finance, real estate investing, and financial independence.

Family, Relocation General Change  

A large portion of Gen Z is entering the workforce within the next few years if they haven’t already. Some Zoomers are gearing up to fend for themselves in a highly unforgiving, over-saturated job market upheld by a volatile economy. This environment leads to lower starting salaries, reduced job security, and a greater likelihood of needing to relocate, all of which make committing to homeownership more challenging.

According to Bank of America, 46% of Gen Z financially relies on their parents at least to some degree, making a home purchase a familial endeavor, rather than an individual one. 54% already don’t pay for their own housing and rely on their parents for financial support or a co-sign.

In addition to financial contributions, first-time Gen Z home buyers are needing to accommodate family members’ opinions, preferences and beliefs. Some families believe that purchasing a home is an investment that involves the whole family, and some aim to avoid interest rates at all costs.

Gen Z’s parents/grandparents share different philosophies on homeownership than they do. Older generations tended to view the concept as a key milestone and a measure of financial success. In contrast, Gen Z prioritizes flexibility and experiences over owning property. Those who lived through or were affected by the 2008 financial crisis will likely have a more wary, cautious approach to homeownership.

Relocating is having an increasingly negative impact on the generation of young adults, since it only seems to be getting harder and less feasible. On average it takes someone 3 months to recover mentally, physically and emotionally from a big move. A recent study from Lemonade.com concluded that Gen Z is the only generation that takes longer than average to recover, with their average bounce-back period being 3.3 months compared to Gen X (1.7 months) and millennials (2 months).

Stress incurred over these months manifest themselves in our daily lives. 25% of Americans have reported lower quality of sleep, and 20% lower overall moods during and after the process.

Ways to alleviate this stress consist of having open lines of communication with everyone involved in the process about financial goals, plans, and expectations can help alleviate concerns and build mutual understanding. Gen Z and their families can also work on creating a solid financial plan to understand the cost and responsibilities of homeownership. Consulting with a financial advisor and real estate experts for professional guidance can provide valuable insights to ensure a seamless homebuying process alongside your loved ones.

Fear Of Taking On More Debt

In recent years, it’s felt more difficult than ever to find a job, especially for Generation Z. The young adults have been widely deemed “difficult to work with” and stigmatized in corporate settings before some of them even graduate high school. A survey from ResumeBuilder.com states that 74% of managers and business leaders find Gen Z the single-most difficult generation to work with, citing that they lack technological skills, have little motivation, are easily offended, and dishonest. This study reported that even after obtaining a job in this market, 1 in 8 business leaders have fired a Gen Z employee within their first week of employment. In a climate of “entry-level” jobs requiring 3-5 years of experience, these practices make finding stable employment and garnering experience even more of a challenge.

Unemployed workers are receiving an average of four callbacks for every 30 applications submitted. According to Bankrate.com, as of May 2024, the median starting salary for Gen Zers age 20-24 is $39,364, with women receiving a $6,200 lower average salary compared to men. This salary, compared to how much debt the generation is incurring sets up young adults for a lackluster homeownership journey, if at all.

TransUnion^® found that Gen Z’s debt makes up for 16% of their income compared to the 12% for millennials in the previous decade. Subtracting 16% from the generation’s starting salary leaves us with $33,065.76, keeping in mind women make $6,200 less on average, meaning starting salaries could realistically be approximately $26,865.76 for some. While college majors, degrees, and types of jobs can all make this number differ, inflation paired with a difficult housing market make for a rather cutthroat real estate environment with high expectations and little opportunity for Generation Z.

Choosing A Simple Life

Based on our nation’s economic landscape, it’s likely that Gen Z will begin their homeowning journey later than millennials and spend more time strengthening their personal finances post-grad. A recent study from Lending Tree analyzed Gen Z’s homeowning tendencies and found that they often choose simpler lifestyles and will travel great lengths to make it happen for themselves.

Traditional homeowning in big cities or lush suburbs is beginning to seem out of reach, and these locations aren’t necessarily known for their affordability. Gen Z makes up for 14.91% of potential homebuyers, and the study identified which cities/metro areas have the largest share in Gen Z’s mortgages. 

To combat the contentious housing landscape, Gen Z is moving to smaller cities to relocate. Salt Lake City holds the biggest share of Gen Z homeowners, with 22.9%, followed by Oklahoma City (22.36%), and Birmingham, Alabama (20.79%). The least prevalent cities among Gen Z consist of San Francisco (7.76%), New York City (8.88%), and San Jose, California (9.7%).

With all they’ll ever need at their fingertips on their phones, this first-time home buying generation is drawn to secluded cities with a lower population density. Based on the cities that the generation favors the most, it can be observed that they tend to flock to mountainous and southern locations. The south has often been associated with lower home prices, and has a more promising job landscape, making these areas the most efficient places to lessen the gap between Gen Z’s housing costs and income.

The cities that Zoomers choose to settle down in are the best fit for their housing needs. Since most don’t have families quite yet, extra bedrooms and large backyards aren’t as a big of a priority. Remote and hybrid job opportunities are far more common, meaning Gen Z isn’t prioritizing cities with bustling job landscapes like millennials once did. The most popular states among millennials when they started their housing journey were Washington, California, New Jersey, New York, and D.C.

To this day over 40% of people moving to these states are millennials according to GreenBuilderMedia.com. Gen Z’s predecessors moved to these high-cost cities in search of high-paying jobs, while Gen Z would rather live in more sustainable cities with shared amenities and more lease flexibility.

The Bottom Line

Raised amidst economic instability, technological shifts and social upheaval, Gen Z faces a set of unique hurdles upon their foray into homeownership. The combination of record-high housing prices, student debt, and a complex job market has created a perfect storm of obstacles for young adults today.

Moreover, Gen Z's pervasive distrust of institutions and a lack of financial literacy further complicate their journey toward homeownership. The generational divide in financial understanding and the high cost of living in traditional urban centers have pushed many to seek simpler, more affordable living arrangements in less conventional locations.

Despite these challenges, Gen Z has exhibited a great sense of resilience and adaptability. Making themselves more flexible and leveraging digital resources for financial education leads young adults to overcome the barriers that stand before them. As they continue to shape their futures, their approach to homeownership reflects a broader trend toward redefining success and embracing new models of living. This generation's ability to navigate these complexities will ultimately determine how they secure their place in the housing market and, more broadly, their role in shaping the future of homeownership.