DEC 24, 2024
As a real estate broker, I understand that Gen Z (those born between 1997 and 2012) faces unique challenges as they transition into adulthood and consider homeownership. While only 26.3% of Gen Z adults currently own homes compared to 54.8% of millennials and 72% of Gen Xers, there’s a silver lining. Research shows that Gen Z is buying homes at a rate similar to millennials and Gen X at the same age, indicating that they are more capable of homeownership than often perceived.
Despite the stereotype that Gen Z can’t afford homes, supported by a 2024 Bank of America report indicating that 54% of Gen Z adults rely on parental financial assistance for basic expenses—this generation is on track to be the wealthiest ever. Currently, the average 25-year-old Gen Zer earns around $40,000 annually, which, when adjusted for inflation and other economic factors, positions them better than previous generations were at that age.
As more Gen Zer's explore homeownership, it's essential for them to educate themselves about the buying process and align their financial strategies with their long-term lifestyle goals. Here are some key tips for first-time homebuyers from my experience in the real estate market.
One common mistake I see with Gen Z homebuyers is not thoroughly researching the homebuying process. With a wealth of information available online, it’s easy to be misled by social media “real estate gurus” who oversimplify the journey. While they may make it seem easy, they often overlook the complexities and long-term implications of homeownership.
I encourage Gen Z buyers to seek out professionals such as licensed real estate agents, attorneys, lenders, and contractors. By gaining a comprehensive understanding of what to expect throughout the process. Knowledge is power, and being informed will empower you to make the best decisions.
Before diving into homeownership, it's crucial to assess your financial situation. Determine how much you have saved, what you can allocate for a down payment, and what monthly payments you can comfortably afford. I recommend consulting with a financial advisor or using reliable online tools to map out your finances as you consider buying a home.
While the traditional wisdom suggests saving a 20% down payment, that shouldn’t discourage you. There are various mortgage options, including Federal Housing Administration (FHA) loans and Veteran Affairs (VA) loans, which require lower down payments. Understanding these options and getting pre-approved can make the process smoother and help you secure better rates.
When budgeting for a new home, it’s easy to focus solely on the monthly mortgage payment. However, there are numerous additional costs to consider, such as closing costs, property taxes, insurance, and maintenance. As a broker, I advise clients to prepare for these expenses and budget for future purchases, such as furniture and home improvements.
It’s also wise to establish a rainy-day fund to cover unexpected costs that can arise, especially in the early years of homeownership.
Your lifestyle should influence your homebuying decision. Evaluate factors like proximity to work, social activities, and access to amenities such as parks, grocery stores, and gyms. Ensuring that your new home aligns with your lifestyle will enhance your overall happiness.
Additionally, consider your future needs. Life changes, such as career shifts or family planning, could require more space. Opting for a home with extra room can provide flexibility and adaptability as your life evolves.
While it may seem premature to discuss selling when you’re just starting to buy, understanding potential resale value is critical. It’s essential to consider how a property might appreciate over time. Assess the neighborhood, market trends, and potential for future developments, as these factors will influence the value of your investment.
Although the future is unpredictable, being informed about how a home’s value might hold, or increase is a crucial component of your buying strategy.
There’s a pervasive myth that only the wealthy can afford homes today, but that simply isn’t true. While prices can be high, many viable options exist for first-time buyers. Consider exploring up-and-coming neighborhoods where home prices are more reasonable or consider purchasing a fixer-upper that you can personalize.
Additionally, co-buying a home with a non-romantic partner is an increasingly popular option. Nearly 15% of Americans have co-purchased homes, and a significant number of Gen Zer's are open to this idea. Sharing the financial responsibilities can make homeownership more attainable, but it’s crucial to ensure that all parties are clear on their responsibilities.
Disclaimer: This content is meant for informational purposes only and is not intended to be construed as financial, tax, legal, or insurance advice.
