New homeowners group - Gen Z
According to Forbes, one of the world's leading economics magazines last week, 30% of Gen Zs turning 25 in 2022 (those born in 1997, when Gen Z starts) own a home. Compared to previous generations, people born in the year that each generation started had a higher percentage of people owning a house by the time they reached the age of 25. In other words, when Millennials born in 1981, when the Millennial generation started, turned 25, the rate of home ownership was 28%, and when Gen X, born in 1965, when Gen X started, the rate of home ownership was 27%.
So why did this happen?
First of all, many of this Gen Z group bought their homes when mortgage rates were low between 2019 and 2021. On the other hand, in the case of Millennials, there was a subprime mortgage crisis when Millennials born around 1981 turned 25 years old. Yes, it was a time when nobody was buying a house.
The regional part also plays a part, in the case of Gen Z, once they bought houses where they could live. For example, Cincinnati, a rust belt region, is representative. Perhaps working from home has made this more flexible. On the other hand, in the case of millennials, they had no choice but to buy a house near a large city where jobs were widely distributed. Of course, the more expensive the house, the more difficult it would be to buy.
Changes in the labor market also played a role. Average wages rose quickly during the corona period. Because average wages rose by 22% in 2022 alone.
To tell you my very personal opinion from this article, more Gen Z will enter the real estate market at an earlier age than previous generations. Crowd psychology will make them that way.. This is because, of course, anxiety will work if your friends around you buy a house.
Therefore, competition for home buyers, especially starter homes, will become more intense in the future. The real estate market has already shrunk a lot over the past two years. As I have often mentioned, the average age to buy a first home in the US is 31 to 33 years old. Currently, 31-33 year olds are millennials, and these millennials are a group with a larger population than any other generation. As the market shrinks, there is a generation of 31-33 year olds who have not been able to buy a house, so millennials who have missed the age to buy a house will enter the market. Then it will be a market where the more active Gen Z, millennials who miss out on a homebuying opportunity, and regular buyers (people of any age who have to move for their own reasons) all compete together. The problem is that there isn't enough supply to meet that demand.
I can't tell you not to buy or buy a house. However, if you are thinking of investing in real estate, I recommend that you seriously consider these starter homes.
See you next time with a fun and helpful article.