Why Nearly Half of Gen Z and Millennials Are Buying Homes Despite Skyrocketing Rates

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A surprising trend has emerged in an era marked by fluctuating economic conditions and rising interest rates: nearly half of Gen Z and Millennials are stepping into homeownership. According to a new survey launched in June 2024 in partnership with Pollfish of 2,500 adults aged 18 to 54, who either bought a house in the last 18 months or plan to buy one soon, Gen Z and  millennials appear undeterred by the financial challenges often accompanying home buying and high mortgage rates.

These generations are leveraging innovative strategies and traditional support systems to secure their place in the housing market. Read on to learn more about key factors driving Gen Z and millennial home-buying decisions, how they manage financial obstacles, and what this trend means for the future of real estate.

How Gen Z and millennials beat home buying hurdles

Gen Z and Millennials have historically yet to catch up with other generations in purchasing homes, often due to financial challenges and economic uncertainties. However, driven by a desire for stability and long-term investment, changing personal circumstances, and concerns over rising housing prices, younger generations are now stepping into the housing market with renewed determination.

Home buying motivation among young adults

Gen Z (12-27 years old) and millennials (28-43 years old) are distinct generations with unique characteristics shaped by different cultural, technological,​​ and economic experiences. That said, this survey found a significant overlap between those age ranges, specifically 25-to 34-year-olds, regarding mindsets around purchasing a home today.

When it comes to Gen Z and millennials entering the housing market, 46% of respondents in this age group have bought homes in the last 18 months, the highest rate among all age groups (compared to 38% for 35- to 44-year-olds, 33% for 45- to 54-year-olds, and 40.82% for 18 to 24-year-olds), even though 56% perceive that mortgage rates are increasing.

Additionally, 26% of 25 to 34-year-old respondents plan to buy homes soon despite high interest rates, compared to only 24% of 35 to 44-year-olds and 22% of 45—to 54-year-olds.

When asked about their main reason for buying a home:

• 44% reported it was due to a change in their circumstances, such as recently getting married, starting a family, or needing to relocate.
• 39% said they believe the long-term benefits of homeownership outweigh current interest rates.
• 37% said they were concerned about increasing home prices and wanted to lock in their purchase.

Key drivers behind Gen Z and millennial home purchases

Job stability and income levels

Job stability and steady incomes are crucial factors for Gen Z and millennials when buying a home. With current economic uncertainty and job market fluctuations, many in this generation prioritize security and stable employment before making a significant financial commitment. Higher, stable incomes provide the financial foundation and confidence needed to afford down payments, mortgages, and other homeownership costs, especially with high interest rates.

That said, some reports show the unemployment rate for 16 to 24-year-olds is about 8%, the lowest it’s been since 1953. This increased job stability is helping Gen Z enter the housing market now more than ever.

Desire for independence and investment opportunities

Gen Z and millennials values independence and sees homeownership as a pathway to achieving it. Owning a home provides a sense of autonomy and freedom that renting does not. Additionally, real estate is seen as a relatively lucrative investment opportunity. With rising property values, 25 to 34-year-olds sees potential for long-term financial growth and security through homeownership.

The role of remote work and flexibility

As a large percentage of the workforce continues to work from home or enjoy a hybrid working model, this continues to influence Gen Z and millennial’s home-buying decisions. With the ability to work from anywhere, they are no longer tethered to living in high-cost urban areas, and the flexibility allows them to explore more affordable housing markets in suburban or rural areas, allowing them to get more value for their money.

Unique home buying strategies employed by Gen Z

House hacking

House hacking is a popular strategy among Gen Z and millennials for managing high interest rates and making home ownership more affordable. This strategy involves purchasing and renting out parts of a property, such as individual rooms or complete units, to generate rental income. This helps offset mortgage payments and other housing-related expenses, making it easier for young homeowners to manage costs.

Sharing with friends

Another strategy involves sharing a home with friends. By pooling resources and co-purchasing or sharing a property, they can split the costs of a down payment, mortgage, utilities, maintenance, and other expenses. Not only does this make homeownership more attainable, but it also creates a supportive living environment since it can help reduce each individual’s financial burden.

Financial support from relatives

Financial support from relatives can significantly influence Gen Z and millennials’ ability to buy homes. Many young buyers receive assistance from family members through gifts or loans for down payments and closing costs, which can help bridge the gap between their savings and the amount needed to purchase a home.

Innovative mortgage products and financial aids targeted at young buyers.

A significant majority (54.12%) of survey respondents are exploring alternative financing options, reflecting widespread interest in non-traditional mortgage solutions. For example, nearly 20% of respondents have switched to adjustable mortgage rates, which are an alternative financing option with interest rates that adjust over time based on the market.

Similar to ARMs, about 29% of respondents have used mortgage points (or discount points) to lower their rates. Mortgage points are a form of prepaid interest you can pay upfront in exchange for a lower interest rate and lower monthly payments. This percentage of those using mortgage points to lower their interest rates is higher in the 25-34 year old age group, with nearly 31% doing so.

Bottom line

Gen Z and millennial’s entry into the housing market is driven by job stability, a desire for independence, investment opportunities, and changing life circumstances. Despite higher interest rates, they use creative strategies like house hacking, sharing with friends, and investigating other mortgage product options to make homeownership a reality. These approaches can help them mitigate the financial burden of owning a home and allow them to achieve their goals. And, as survey results show, a large percentage are making it happen.

The future of Gen Z and millennials in the housing market looks promising as they continue to adapt and innovate. As remote work continues to be prevalent and open doors to more affordable locations, and as this generation gains more financial literacy and stability, their influence on the housing market will continue to grow. Ultimately, Gen Z and millennials are poised to redefine traditional homeownership and create new norms in the real estate industry.

Survey Methodology:

The survey, launched on June 5, 2024, with Pollfish, explored the impact of interest rates on homebuying decisions. Conducted over 48 hours with 2,500 respondents aged 18-54, it targeted recent and prospective homebuyers, focusing on perceptions of interest rates and their effect on behavior. The results, weighted for age and gender balance, provide insights into trends and challenges in the current interest rate environment.

Disclaimer: Article content is intended for information only. It may not reflect the publisher nor employees’ views. Consult a mortgage professional before making financial decisions. Publishers or platforms may be compensated for access to third party websites.

Contact Information:
Name: Sonakshi Murze
Email: [email protected]
Job Title: Manager