Why homeownership is rougher for millennials than Gen Z

Homeownership has long been an aspiration; however, that goal may need to be revised if today's younger generations are to reach it. With millennials coming of age during the Great Recession in 2008 and Gen Z grappling with soaring housing costs, each faces unique and formidable challenges in purchasing a home.

Millennials, born between 1981 and 1996, started their adult lives on a tougher path to homeownership than Gen Z. They came of age during the worst economic downturn since the Great Depression, facing high unemployment and sharply declining home values that severely impacted their financial prospects, as highlighted by a 2020 Pew Research study.

The housing market crash left a lasting impact on millennials, setting back their home-buying ambitions as they worked to overcome major financial setbacks and gain traction in a sluggish job market. The challenge of high student debt has been a major obstacle for millennials, hindering their ability to save up for a down payment — a problem that hasn't hit Gen Z as hard. Gen Z — born between 1997 and 2012 — has entered adulthood with slightly more stability, learning from the financial hardship lessons imposed on the previous generations. 

Ellen Flowers, editor of  The Perennial Style, said, "[Millennials] entered the market during economic instability, making it harder to save for a down payment. Now, we're dealing with the aftermath of years of rising interest rates. The road to homeownership has been tougher for both generations, but millennials had to contend with additional financial obstacles during our prime buying years."

Sergio Aguinaga, owner and founder of Michigan Houses For Cash, agrees: “Millennials have it even worse since they dealt with the 2008 financial crisis, low wage growth, and now face soaring home prices. They entered the market when there were fewer homes available and more competition which makes it tough to find affordable properties and build wealth.”

Then there are the additional downstream impacts, as Joe Muck, Realtor at J Muck Realty, described: "While conditions of high interest rates, low housing inventory and high housing prices impact other generations, millennials have the added psychological trauma of having seen their parents and others go through foreclosure and other negative experiences."

While spared the brunt of this initial economic meltdown, Gen Z now contends with the lingering aftermath — skyrocketing rents and an ever-increasing cost of living that has failed to decrease even as the market gradually recovers.

Following the 2008 financial crisis, stringent regulations to prevent future catastrophes inadvertently created new barriers for millennial homebuyers. Stricter lending rules and elevated credit requirements have made securing a mortgage considerably more difficult. Life events that typically lead to buying a home, such as getting married or starting a family, have been postponed, pushing back their entrance into the housing market. 

Millennials' monetary tightrope 

According to a recent report from Case-Schiller National Home Price Index, U.S. home prices have spiked by 47% since 2020.

The rental market also provides little relief. Consumer Price Index data from the Bureau of Labor Statistics shows that renters across the U.S. have seen the average rent rise 18% over the last five years, outpacing inflation.

Many millennials are saddled with substantial debt and lethargic incomes, causing them to become financially disadvantaged. According to the latest U.S. census data, the number of Americans aged 25-34 living with their parents has jumped over 87% in the past two decades.

Nick Janovsky, global real estate adviser at Premier Sotheby's International Realty is unsurprised.  “[Millennials] have confronted rising prices and stagnant wages. Balancing debt with the costs of homeownership makes it increasingly difficult to acquire ideal homes. Persistent increases in insurance costs and artificially inflated mortgage rates leave millennials far behind property ownership, compared to boomers of our age.”

Tim Choate, founder and CEO of RedAwning.com, Inc., added: "Millennials have faced more prolonged economic obstacles, meeting with rapidly increasing home prices over the past decade. This generational delay in wealth accumulation has been exacerbated by the recent surge in interest rates, pushing a sizable number of millennials to pursue secondary income through property management or rental platforms as a buffer."

Gen Z's housing hurdles

Gen Z faces similar financial issues as their predecessors. According to a Zillow analysis of the U.S. Census Bureau's 2022 American Community Survey, 58% of Gen Z renters spend more than 30% of their income on housing, classifying them as "rent burdened." This heavy financial load makes it difficult to save enough for a down payment. The non-stop rise in rents and slow wage growth further worsen their challenges. As housing prices continue to climb, many in Gen Z find themselves locked in a cycle of renting, unable to break into the increasingly competitive housing market.

The urban squeeze 

The allure of city life comes at a steep price for both generations. Urban centers, home to coveted job opportunities and cultural attractions, have seen living costs soar, placing an ever-tightening squeeze on younger residents. According to a Zillow study, in cities like San Francisco, where the median home price has surpassed $1.3 million, even high earning millennials find themselves priced out of the market.  This urban affordability crisis has also contributed to a troubling rise in homelessness among younger generations, according to U.S. Housing and Urban Development Study Point-in-Time Studies from 2017 and 2022.  

The path forward

President-elect Donald Trump's pledges of lowering taxes, cutting regulation and reducing interest rates lead his supporters to believe these measures will increase the housing supply due to increased investment in housing development. They also feel these same policies could increase disposable income, raising housing demand. Trump’s critics are quick to argue that his proposed tariffs will raise consumer prices and reduce disposable income.  

It will be up to lawmakers to address the unique challenges each generation faces with the goal of reviving the dream of homeownership for younger Americans and strengthening the overall health of the U.S. economy.