A growing number of millennials and Gen Zers are losing faith in the American Dream as a new report from Redfin revealed that 18% and 12%, respectively, do not think they will ever afford to buy or own a home.
The ongoing crisis of affordability is the number-one barrier to homeownership for younger Americans, according to Redfin. About half of Gen Z and millennial renters believe they’re unlikely to purchase a home in the near future citing the current high price of homes on the market. Redfin fielded surveys to 4,079 residents who either moved in the last year, plan to move in the next year, or rent their home. This report focuses on the 1,340 Gen Z (aged 18 to 26) and 1,973 millennial (aged 27 to 42) respondents.
About half of millennials (or 46%) and 33% of Gen Z say their lack of ability to save for a down payment has been a monumental barrier for them, and about one-third of each generation say they would not be able to afford a mortgage payment at today’s rates anyways.
In addition, student loan debt in bearing down on them as 21% of Gen Z and 16% of millennials want to pay off that debt before entering into the housing market.
“The worsening housing affordability crisis has an outsized impact on Gen Zers and millennials because they’re much less likely to own a home than older generations,” said Redfin Chief Economist Daryl Fairweather. “That means many young Americans don’t benefit from rising home prices by gaining equity. Instead, these would-be first-time homebuyers bear the burden of high prices, high down payments and high monthly mortgage payments, without profits from a previous home to offset the cost. Many young people don’t have a choice between renting and buying. They’re renting their home because even though rent payments have increased, too, it’s still more affordable than buying in much of the country–and renters don’t need a down payment.”
Conditions started by the pandemic have made it harder for first-time buyers to enter the market as median home-sale prices are at record highs—now up 40% since 2019. Wages have risen, too, but not as much: Average hourly earnings rose roughly 20% over the same period. Record-low mortgage rates and the increasing prevalence of remote work during 2020 and 2021 fueled intense homebuying demand, which drove prices up. Now, rising mortgage rates have exacerbated the expense of owning a home. Mortgage rates have more than doubled from their low, hitting their highest level in more than 20 years in August, while home prices remain high.
Roughly one-quarter (26%) of Gen Z adults and half (52%) of millennials own their home, compared to 71% of Gen Xers and 79% of baby boomers.
In addition, about 40% of the younger generations that want to get into a house are taking up second jobs to achieve their goal. About two of every five Gen Zers (41%) and millennials (36%) say they’ll work a second job to help fund their down payment, the most commonly cited method aside from saving directly from paychecks.
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