Generation Z Spending Habits

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Generation Z Spending Habits

Eighty-six percent of Generation Z want to own a home someday, considering that homeownership is critical to achieving the American Dream. Obstacles to homeownership include home prices (92%), saving for a down payment (82%), and job change (68%). Student debt is considered a major obstacle, accounting for 54%, only for Generation Zers paying for college.

Views of Homeownership

  • Generation Zers consider homeownership as one of their most important goals. They have "strong, positive views of homeownership, and the overwhelming majority (86%) want to own a home someday."
  • Generation Z self-estimates that they will purchase a home for the first time when they turn 30 years old. Besides, the current median age for first-time home buying in the United States is 33 years old.
  • Views of homeownership for Generation Z:
    • Make them proud: 93%
    • Sign of success: 86%
    • Something that provides privacy: 93%
    • Providing independence and control: 88%
  • Generation Z's homeownership rate is 85.8%, while the national rate is 64.2%.
  • The top reasons behind buying a home decision are "starting a family (59%), building wealth over time (47%), and making their family proud (33%)."

Homeownership and Renting

  • Eighty-two percent of Generation Z "believe that homeownership is critical to achieving the American Dream, while 97% believe they will someday own a home, according to data from the National Association of Realtors."
  • Generation Zers are growing in an epoch where "renting is historically unaffordable, and the housing market is markedly stable."
  • Nineteen percent of Generation Z consider renting as a more appealing choice than buying a home, while 30% of Millennials view renting as a more appealing choice.
  • Up to 33% of Generation Z reported that renting makes them feel like part of a community, compared to 39% of Millennials.
  • Similarly, about 40% of Generation Z (as compared to 51% of Millennials) are convinced that a rented home will cost less than a bought one.
  • This generation is less enthusiastic about rented homes than their precedent generation, Millennials. However, they admit that renting has some positive aspects as follows:
    • "Having flexibility over where to live": 68%
    • "Lower stress than owning a home": 63%
    • "Affordable proximity to a medium or large city": 62%

Obstacles to Homeownership

  • According to Generation Z, obstacles to homeownership are the following:
    • Home prices: 92%
    • Saving for a down payment: 82%
    • Job change or unstable job: 68%
  • Student debt is considered a major obstacle, accounting for 54%, only for Generation Zers paying for college.
  • Other obstacles include hefty down payments, heavy loans, and credit card debt.
  • Forty-six percent of Generation Zers that have high amounts of student debts to pay is feeling exhausted by these debts.
  • On the other side, for 45% of the generation, student loan debt doesn't represent an obstacle to buying a home. "By comparison, 27% see it as a minor obstacle and another 27% as a major obstacle."
  • However, four out of five Generation Zers are still planning to buy a home in the next five years, despite their massive student debt. Despite the fact that 55% of Generation Z have student loans totaling $25,000 or less, they are currently saving to buy their own home.

Spending on Home Buying

  • Fifty-two percent of Generation Z said they are saving money for home buying.
  • During the home buying process, Generation Z, a deal seeker generation, is more likely to look for saving money, opting for affordable, functional homes.
  • They will compromise "on almost anything as long as it cuts costs," except space: They don’t care about amenities, they are willing to buy a fixer-upper, "they saved for less than five years before buying their homes," they buy homes despite student loan debt.
  • Generation Z's ideal home is a 2,081 square foot home. In fact, they only afford to buy an 803 square foot home.
  • Twenty-one percent of them will receive financial help from their parents.

Home Buying Process

  • The top motivators for buying a home are the following:
    • Seeking more privacy: 45%
    • Build equity and wealth: 44%
    • Life events such as getting married: 24%
    • Expanding their family: 23%
  • Seventy-nine percent of Generation Z "would rather have face-to-face interactions with professionals than carry out the process fully online."
  • Eighty-one percent prefer using real estate professionals.
  • They will more likely attend at least one open house.
  • Nearly 65% of Generation Z reported that they are not confident in their financial knowledge of the mortgage process. Thus, 71% would consult with their parents, 58% would consult a real estate agent, 54% would search on the Internet, 45% would consult with family/friends, and 41% would consult mortgage lender or a bank.
  • According to a report from Transunion, the number of Generation Z consumers with a mortgage rose by 112% from 2017 to 2018.

Homeownership Preferences

  • Generation Z's home location preferences:
    • In proximity to their work: 71%
    • In proximity to friends and family: 52%
    • Near or in an urban location: 25%
    • Within proximity to shopping: 24%
    • With access to nightlife: 12%
  • Fifty-eight percent prefer living in a diverse community, "while 12 percent preferred residing in a homogeneous neighborhood."
  • This preference is because 48% of Gen Z are members of ethnic minorities.