While many column inches are continuously devoted to millennial homebuyers and their potential as homeowners, the generation that follows is quietly making its mark in the housing market.
Generation Z, loosely defined as those who were born after 1995 (which means the oldest are 23 years old), makes up close to 100,000 homeowners in the current market, according to credit agency and global risk provider TransUnion. And their loans were on average $140,000, according to Realtor Magazine.
Daren Blomquist, senior vice president of Attom Data Solutions, told Inman he was not surprised by the TransUnion figures given recent research from Attom that revealed the most popular first names of top homebuyers in 2017 were Dylan, Chelsea, Alexandra, Austin and Taylor — all popular baby names from the mid 1990s, he said.
Blomquist said that, anecdotally, he was hearing that Gen Z and younger millennials were receiving financial help from their grandparents, who often have more savings than parents, in order to purchase a home.
The Attom SVP also noted that Gen Z did not have the same “front row seat” view of the Great Recession that millennials had, which has allows Gen Z to enter the market without the same hesitance some millennials have.
Minneapolis-based Keller Williams top producer Amanda Le has helped a number of these financially savvy young first-home buyers.
“It’s more about the cost of renting versus the cost of buying, she said. “With interest rates being so low and the economy being so great, it makes sense,” she told Inman.
Reality TV is also having an effect — HGTV is showing young people how to be an investor, she said. And now, because of social media, young people see their friends buy a house so they want to do it too, she added.
The Gen Z clients in her market tend to have worked since the age of 16 or 18 and do not have college debt, Le said.
Le, who works with many young first generation Americans and is first generation Vietnamese American, said Gen Z buyers are not buying homes for themselves alone, but for their families too.
They work for a few years and say, “Okay, I’m an adult now,” Le said. They are buying townhomes and smaller entry level homes in the $150,000 plus range.
In her market of Minneapolis, the average house costs $250,000, so young buyers need to be earning $30,000 or $40,000 a year to afford a mortgage. Le remembers a 19-year-old client who earned $14 an hour when he first approached her for help with his home search. Le and the lender she works with told him he had to earn more, so he went back to his employer, negotiated a raise and then bought a house.
You can’t go wrong on your first house, Le said, as people tend to buy only what they can afford. From there, the only way is up.
Prompted by her mother, Le bought her first home at the age of 23, and it worked out very well.
“It was the best thing I ever did. I have it rented out now and I’m making money on it. I bought a second home and I’m only 30,” she said.