A Home Buying Guide For Gen Z

It’s no surprise when I say that many housing opportunities are getting out of reach, or are already, for many people. The rise in housing prices and cost of living is especially affecting people born from 1997-2012, better known as members of Generation Z (Gen Z).

I have tasked my summer intern, Andie Kleider, with discovering the problems and anxieties that her generation, Gen Z, has with real estate. In the following blog, Andie presents her findings:

What Does Genz Think About Homeownership?

We face challenges unique to growing up in this time, yet there’s a goal that’s the same for many people: to own a house. My goal through this blog and research project was to find anxieties and questions that Gen Z has about their future with housing. Additionally, I wanted to see what people already know, if anything, about residential real estate.

I surveyed 80 people around my age (18-23) on social media, using polls and open-response questions posted on my accounts and supported by posts from my employer, Andersen Group Realty. The results were almost exactly what I expected and are detailed below.

Thinking about buying your first home? Check out these other blog posts for helpful tips!

The Results

I Asked: Do you know what loan and mortgage options are most accessible for first time home buyers?

My survey showed that 91% of the respondents do not know any loan options. This isn’t shocking, though, as it’s not something people are told unless they are beginning their home search process. In reality, if people know some potential options before they begin their search, it relieves stress about where the money is supposed to come from and is one less step to complete when the time comes.

The Truth About Loans & Mortgages

A commonly used loan for first-time home buyers is an FHA loan. An FHA loan is a very accessible loan for home buyers, as it has a lower credit score and down payment requirement. A loan with a low credit score requirement is important because young people typically don’t have the credit history needed to build a high credit score. Also, a low downpayment is an advantage because many young people or first-time home buyers typically don’t have a large down payment saved up.

Depending on your situation, you may also be able to qualify for a VA loan or a USDA loan. A VA loan is for active-duty service members, veterans, National Guard and Reserve members, and certain spouses of veterans. The advantage of a VA loan is there is no down payment or credit score requirement, which is extremely helpful for any veteran or active military who doesn’t have much savings or credit history. A USDA loan is for low-to-moderate-income people/families who live in eligible areas. The advantage of a USDA loan is there is no down payment requirement and a lower credit score requirement, but the property must be in a USDA-eligible location.

Other government-sponsored loans like Freddie Mac and Fannie Mae are good options for first-time home buyers, as they have low down payment and credit score requirements. Also, many states offer loans and payment assistance for first-time home buyers, so learning about assistance offered specifically from your town or state would be beneficial.

These brief descriptions of loan options can help you start your journey by understanding what is out there and available to help you purchase your first house. My biggest piece of advice regarding loans would be to call a mortgage professional and talk to them.

Additionally, you can often get a pre-approval evaluation for a loan with a soft credit check, which won’t harm your credit. This pre-approval evaluation is beneficial because then you can speak with someone who has your information and can help you discover what your best options are for loans.

I Asked: What do you think is the average downpayment as a first-time buyer?

I provided options of 18% – 20%, 5% – 10%, 0%, 25% or higher. Out of the 80 people who responded:

49% believed that the average down payment was 18% – 20%
37% thought it was 5% – 10%
13% thought it was 25% or higher
1% thought it was 0%

The Truth About Downpayments

In reality, the average downpayment for a first-time home buyer is 5% – 10%, which was not the option with the highest number of responses. Generally, there is a misconception about down payment amounts, which is the stem of a lot of people’s anxieties.

The majority voted that the average downpayment for a first-time home is 18% – 20%. The average cost of a new house across the United States in 2022 was $428,700 and in Massachusetts was $654,850 in 2023. An 18% – 20% down payment on that house would have been $77,166 – $85,740 and $117,873 – $130,970, respectively. This is a huge amount of money for a young person to have saved, and this purchase price varies a lot with location and type of house as well.

Regarding down payment assistance, many state or local governments provide loans or grants to help first-timers purchase their first house. These programs are specific to areas, so to learn more about what is available to you, you should research online and contact your local government housing department for more information.

Searching for more information about buying a home? Explore these related readings.

Start Saving Early

Now that the majority of Gen Z is going to college, there is a large amount of people with student loans. Student loan payments often haunt people well into their 30s, 40s, and even their 50s (depending on the degree of education) and are commonly several hundred dollars per month.

My survey asked people if they were worried about how to save for a downpayment while they were paying hundreds of dollars in student loan payments each month at the same time. To this, 61% of respondents answered they were worried about how to do both. Also, 16% responded that they hadn’t even considered how student loan payments would affect their ability to save. In my opinion, thinking about how to juggle different types of payments is a bridge many people have not approached yet but will be soon. The sooner we begin to devise a plan on how to coordinate different expenses and savings, the better equipped we will be to afford everything.

A realistic and common rule for saving is to place 15% – 20% of your paycheck into an interest-building savings account and not touch the money unless absolutely necessary. The amount deposited into the savings account can vary depending on how much of your income is for expenses, such as rent and student loans.

For example, if your necessary expenses only take up 60% of your income, then you could save closer to 30% or more. This additional amount could go towards other accounts, such as a retirement fund. To reduce stress and anxiety about saving for a house while simultaneously having other expenses, you should create a reasonable and attainable goal and plan for how you manage your money. That way, you can know without a doubt that you are planning accordingly to reach your goal of owning a house.

Find the Right Buying Agent

When it comes time to buy your first house, you likely will have many questions and anxieties surrounding the process. The right real estate agent for you will calm those anxieties and answer those questions to help you reach this milestone in the smoothest way possible. As a client, you need somebody who completely understands your wants and needs, and who you trust for guidance in this process. Finding this agent can be a daunting task, but there are steps to take to help ensure you’re on the right track.

First, you should look for potential agents to interview. You can find agents by asking friends, neighbors, coworkers, etc. for recommendations. Even if you don’t end up using the same agent as them, it might lead you to another agent within the same brokerage that is a better fit. If no one in your circle has any good recommendations, you can do an online search for brokerages near you or search on the National Association of Realtors directory.

Remember that when you are talking to an agent, you are interviewing them as much as they are interviewing you. Both sides want to see if the pairing would be a good fit, and if each side can provide the services the other side needs. One criterion that you should assess in a realtor is their experience and knowledge of real estate. A strong knowledge and base in real estate will help everything run smoother and will make you feel more secure in trusting them.

Also, you should get an understanding of their process and timeline of how they prefer to work. This will help you see what the next few weeks/months would look like for you if you worked with them. Understanding other services that come along with their brokerage or work is also important in helping you see what the process could be like and what will be taken care of for you. Generally, having a strong conversation with an agent and putting everything out on the table between you is best. Full transparency with what you know, what you want, and any questions you have will allow your agent to bring you the best services possible.

Looking for more information about interviewing a real estate agent? Click here to read our dedicated blog post on the topic.

Have the Right Perspective

On average, Gen X bought their first house around the age of 29-30. In 1995, when the older end of Gen X was buying houses, they were paying an average of $133,900 across the United States. For the younger side of Gen X, in 2010 their houses averaged $173,000 across the United States. This is a 29% increase in value, and most likely would have been much higher if it weren’t for the housing market crash in 2008, which affected the market from around 2007-2010.

Currently, the older end of Gen Z is only 27, and many do not own a house. But for the older end, if they purchased a home in 2022, they were paying an average of $428,700 for new homes and $361,367 for existing homes. Housing was nearly 2-2.5 times more expensive for these Gen Z’s than for their Gen X parents. The younger members of Gen Z are not yet old enough to buy a house as they are 12 years old. Based on the trajectory Gen X faced between the older end and younger end, it can be concluded Gen Z should expect an average home price of at least $460,000 – $550,000 or more across the United States.

These prices are averages for the entire United States, which has a large variety of housing prices. For example, in 2022 the average house price in the Great Plains region (Nebraska, Iowa, Kansas, and Missouri) was $285,922, $467,100 in New England, and $741,300 in Boston. As you can tell, these average prices vary widely depending on location, but with the trajectory applied, we can see how expensive housing will be for late Gen Z-ers.

The Big Takeaway

Overall, the home-buying process is a huge milestone, and concern, for many of us. For those of us in Gen Z, it’s a dream and goal that most of us don’t know much about how to reach. It is plausible and realistic if you start working on reaching it soon. I hope this blog and all of the information in it was a helpful first step for you to learn about what you need to start doing to help yourself become a future homeowner.

Working With Andersen Group

Andersen Group Realty has extensive experience in supporting and working with first-time homebuyers. Andersen Group provides services for all of the steps along the way to minimize stress and maximize efficiency throughout the home-buying process. We understand what it’s like for you as a buyer, so placing your trust in us to help you with this milestone is an honor that is not taken lightly.

Have questions about real estate or looking to buy a home? We can help. Click here to send us an email or call 781-729-2329 to get started.

What Does Genz Think About Homeownership?

The Results

The Truth About Loans & Mortgages

The Truth About Downpayments