Generation Z needs to start saving $304 a month now to buy a home by age 30, according to a new analysis by Realtor.com. The homeownership success of this group will largely depend on the location. Midwest and South are considered regions with more affordable options, it indicated.
The analysis titled “The Home of Home Search” shows that nearly 80 percent of Generation Z wants to own a home before age 30. However, to make their dream of homeownership a reality, they will have to save $304 every month for the next 12 years to buy with a 10 percent down payment plus closing costs on a median-priced home.
Currently, the median price of a home in the U.S. is projected to cost $386,310 in 2031, when today's 18-year-old members of Generation Z turn 30, the analysis pointed out. Realtor.com’s projections based on a 13-year forecast for median home prices in top 100 metros and different down payment savings plans reveal that Generation Z will need to save $1,962 per month will need to save $1,962 per month.
The next most expensive locale is San Francisco at $1,439 followed by Los Angeles at $979, and Honolulu at $946, and California at $877 per month in terms of savings. According to realtor.com’s analysis of Optimal Blue mortgage data, the typical under-30 home buyer used a seven percent down payment to successfully complete their home purchase in 2018. Starting on their 18th birthday, to afford a 10 percent down payment and typical closing costs in the top 10 most expensive metros by the time they turn 30 years old, members of Generation Z will need to save an average of $948 a month.
The median-priced home in 2019 is expected to cost $265,000, but over the course of the next 12 years, the price is expected to increase by nearly 50 percent, according to Realtor.com. Youngstown, Ohio, topped the list of the most affordable metros, where Generation Z would only have to save $108 per month, followed by McAllen, Texas; Toledo, Ohio; Wichita, Kansas; and Little Rock, Arkansas.
"Choosing to live in one of the U.S.'s larger and more expensive metros, especially on the West Coast, is going to make homeownership a difficult task, but that doesn't mean that Gen Z should give up on their dreams.The most important thing they can do is start saving as much as possible early on and let compound interest do the heavy lifting for them,” said Danielle Hale, Chief Economist at Realtor.com.