Since the end of the Depression and World War II, owning a home has been the hallmark of this dream. The introduction of the Federal Housing Administration and the modern mortgage in the 1930s meant that owning a home was within the reach of almost anybody, not just the wealthy who could afford a 50% down payment.
Also, prior to that, you'd make a balloon payment for the entire amount after three or five years.
Gen Z--the cohort of Americans born between 1996 and 2015, is nearly 74 million strong. They're between four and 24 years old, so the oldest Gen Z'ers are out of grad school and starting their careers. They're also buying houses – and in greater numbers than the Millennial generation that precedes them. Why are the youngsters out buying houses when their older siblings are happy to rent?
Age is one factor – they're too young to remember the brunt of the recession. What they do have ingrained in their collective psyches is careful attention to money: how it's saved and how it's spent. This is evident in student loan debt – Gen Z'ers are choosing less expensive colleges, so their debt isn't nearly as crushing. They're also financially savvy and saving for retirement as soon as they land jobs – if not sooner.
This is the generation that grew up on HGTV and Lifetime, so buying a "project" for their first home isn't a daunting prospect. In fact, they think that anybody with a tape measure and a crowbar can renovate a house. Thus, they're more than willing to take on the houses that need a lot of TLC, those fixer-uppers are like catnip to a kid fresh out of college.
Gen Z homebuyers are definitive about what they want – great deals. In December 2019, the median price a Gen Z buyer paid was $160,000 – that's 37% less than millennials, who paid an average of $248,000 in June 2019.
What's the takeaway here? Gen Z buyers are risk averse. They aren't going to buy at the top of the market, and they're not going to buy a house they can't afford. Again, they were young when the recession hit full force, but they understand the lessons: don't overbuy and take out adjustable-rate mortgages. Further, they are reluctant to buy in areas where the property values are likely to decrease.