It’s hard to buy a house, especially if you belong to Generation Z, says Study

It is not easy to buy a single-family home today. But for Gen Z – those between the ages of 18 and 27 from 2024 – especially those with limited income and lower savings, things may not get easier in the future.

According to a report released in late October by InMyArea.com, members of Generation Z who own homes have worked hard to obtain them, employing tactics such as working a second job, moving to more affordable areas and buying foreclosed homes.

If you’ve been watching the housing market lately, it’s not surprising that it’s difficult for Gen Zers to buy a home. In addition to sky-high house prices, mortgage interest rates remain high, with an average of 6.88% for a 30-year fixed-rate mortgage on October 29according to Zillow data provided to Investopedia. That is almost 1 whole percentage point higher than the We saw an average of 5.89% in September before the Fed meeting.

If you’re a Gen Zer looking to buy a house, should you buy now or wait until interest rates drop? That depends on your reasons for wanting a home, the strength of your finances and credit, and your confidence that mortgage rates will fall in 2025.

The average US home costs $359,892, but the average annual income is only $60,580

According to Zillow, the median home price in the US is $359,892, up 2.7% year over year as of September 2024. And according to the U.S. Bureau of Labor Statistics (BLS), the average weekly wage of the 120.8 million full-time wage workers in the U.S. was $1,165 in the third quarter of 2024. Multiplied by 52 weeks, that equates to an average annual salary of approximately $60,580.

With that annual salary it is not easy to buy the average home. After a 20% down payment, the monthly mortgage payment with principal and interest on a 30-year home loan with a 6.88% interest rate would be $1,892. If you only make $5,048 a month (before taxes and any deductions), that mortgage eats up a good chunk of your money. For younger adults who belong to Generation Z, buying a home is even more challenging because their average salary can be even lower as they start their careers.

Workers ages 16 to 24 earned an average weekly salary of $746 in the third quarter of 2024 — about $38,792 per year, according to the BLS. Even older Gen Zers (25 to 27 years old) don’t make the average American salary; they only earn an average of $57,564 per year.

Despite lower-than-average wages, about 25% of Generation Z adults own a home, the InMyArea.com survey found. How did they reach this milestone?

About a third of Gen Zers in the survey said they worked multiple jobs to afford a home, while 22% moved to a more affordable area.

This last strategy makes sense. Buyers can save a significant amount of money when moving to a new state. Zillow reported that the median home value in New Jersey was $535,982 in September. But in West Virginia, that median home value is much lower: $167,571. Gen Zers expanding their search from a pricier housing market like New Jersey to a more affordable market like West Virginia can stretch their home-buying budget.

The survey also found that 18% of Gen Z buyers received money from family members, 15% purchased a fixer-upper to reduce upfront costs, and 11% purchased property from a friend or family member. Another 7% said they had purchased a foreclosed property – a higher percentage than any other age group – while 8% received a government grant or worked with an assistance program for first-time homebuyers.

Despite their financial barriers to homeownership, 87% of Gen Zers told InMyArea.com they agree that homeownership is part of the American dream.

The survey also found that young adults are eager to buy. Overall, 32% of respondents aged 18 to 27 who did not yet own a home said they planned to buy one within the next five years, while 38% said they planned to buy one in more than five years to buy one. Only 30% said they had no plans to buy or were unsure when they would buy a home.

Buy now or wait?

So if you belong to Generation Z, should you buy a house today, or is it wiser to wait until mortgage rates drop?

Darren Tooley, a senior loan officer at Cornerstone Financial in Southfield, Michigan, said waiting for a drop in interest rates could pay off for young homebuyers.

The challenge? No one can predict exactly what mortgage interest rates will do. This means that young buyers can wait a long time for a drop in interest rates.

“Mortgage rates are widely forecast to decline in the fourth quarter of this year and into next year,” Tooley said. “And I really believe this will happen. But interest rates never go up or down in a straight line. There may be days or weeks or months when interest rates rise, even in a market with falling interest rates.”

But what if you want to buy a house now? Maybe your family is growing and you need more space. Maybe you’ve been transferred to a new city for work and want to put down roots. Is it a bad decision to buy a house today if interest rates are higher?

According to Tooley, that is not the case. The right time to buy a home is when it makes sense for you, regardless of interest rates.

“I firmly believe that it is always a good time to buy a home,” said Tooley. “If you look at what home values ​​have done over the years, buying a home is one of the best and safest investments a person can make.”

Moreover, you can always apply refinance your mortgage to lower your monthly payments and pay less interest over the life of your loan.

How we track mortgage interest rates

The national and state averages listed above are provided as is via the Zillow Mortgage API, assuming a Loan-to-Value (LTV) ratio of 80% (i.e. a down payment of at least 20%) and an applicant’s credit score in the range of 680-739. The resulting rates represent what borrowers should expect when they receive quotes from lenders based on their qualifications, which may differ from advertised teaser rates. © Zillow, Inc., 2024. Use is subject to the Zillow Terms of Use.