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According to a new report from Redfin, 30% of 25-year-olds owned a home in 2022, a tad bit higher than previous generations did at 25-year-old as 28% of millennials owned their own home, compared to 27% of Generation X but higher than Boomers at 32%.
The most recent adult generation, Generation Z, were able to take advantage of record-low mortgage rates in 2020 and 2021 to buy homes, even in light of low inventory and rising prices, putting their generation on a slightly better homeownership path than their own parents.
Gen Zers tracking along with their parents’ homeownership rate is counter to the common narrative that it’s more difficult for today’s 20-somethings to buy homes than in generations past. In fact, Gen Z homeowners spent the same portion of their income on housing in 2021 (the most recent year for which income data is available) as they did three decades earlier.
For example, a 25-year-old's median mortgage payment was about $1,013 in 2021, or 16% of their $74,900 which pales in comparison to the $904 mortgage payment in 1990, or 16% of their $69,419 of income.
Many Gen Zers took advantage of the sub-3% mortgage rates to become homeowners during the throws of the pandemic who have also have also benefited from wage growth and a strong job market.
“The rising tide lifted Gen Z homebuyers in 2020 and 2021; they were part of the pandemic-driven homebuying frenzy,” said Redfin Chief Economist Daryl Fairweather. “Record-low mortgage rates, remote work providing freedom to move somewhere more affordable and skyrocketing rental costs motivated some Gen Zers to break into the housing market. While the oldest of their generation had just graduated college when the pandemic started and hadn’t started building up their bank accounts, they had some financial advantages. The unemployment rate was near record lows in late 2021 and 2022, with pandemic-related labor shortages in industries that attract young workers like hospitality and retail prompting those employers to boost pay. Government stimulus payments, the pause on student loan repayments and the fact that many young adults lived with family during the lockdowns also helped Gen Zers save money.”
Younger homebuyers need less money than their older counterparts because they tend to buy cheaper homes with smaller down payments. That’s partly because people under 25-years-old may be more flexible about home size and location than an older person who’s more likely to have children and places more value on proximity to certain schools and their office.
In 2022, the typical primary residence purchased by someone under 25-year-old cost $235,000 and came with a $10,000 down payment (assuming a conventional loan). That’s compared to $355,000 (with a $30,000 down payment) for 25–34-year-olds, and $405,000 ($50,000 down payment) for 45–54-year-olds.
“Millennials have been financially unlucky. Their parents had a more straightforward financial journey,” said Fairweather. “The oldest millennials entered the workforce during the 2001 recession. Then came the 2008 financial crisis, with many millennials in their first post-college job. It limited their earnings, overall wealth and ability to buy a home for many years afterward. Millennials started to gain homebuying momentum just before the pandemic, but they were once again dealt a bad hand with pandemic-related job losses in April 2020.”
Overall, 26% of adult Gen Zers own their home. That’s compared with 79% of baby boomers, the highest share of any generation, followed by Gen X (71%) and millennials (52%).
Click here to read the rest of the report.
