Earnings concern Gen Z homebuyers more than down payment
The youngest group of potential homebuyers is diverse, eager to buy a home, and more likely to be concerned about affording regular mortgage payments than saving up for a down payment, according to a recent survey by Homes.com.
The survey defined Generation Z as those born between 1995 and 2012, suggesting that the oldest members will soon be entering the housing market in larger numbers. More than 1,000 people were polled for the report.
Most respondents—85.8 percent—said they plan to buy a home. Just 4.7 percent said they don't think they will purchase a residence, while 9.5 percent said they aren't sure what they will decide to do.
Audrey Somero, marketing and communications coordinator at Homes.com, said almost 87 percent of respondents said they plan to buy their first home before they reach the age of 35. She noted that many millennials, the next youngest generation after Gen Z, have delayed their plans to buy a residence and that the generation's homeownership rate is only 35.4 percent.
Nearly half the respondents—48.1 percent—said they think they will buy their first home between the ages of 25 and 29. Another 24.7 percent said they expect to buy between the ages of 30 and 34.
Like previous generations, Gen Z respondents were most likely to say they wanted a place to call their own; 82.1 percent gave this reason. A total of 49.5 percent said they thought homeownership would be a good investment, while 40.8 percent wanted a good home for pets.
A total of 37.3 percent of respondents thought a down payment of 11 to 19 percent was necessary for a home purchase, while 26.1 percent thought 20 percent or more was needed. A total of 27.1 percent did not know what percentage was necessary.
The largest share of respondents—30.1 percent—said they expect to take more than three years to save up for a down payment. Another 21.6 percent did not know how long this process might take, while 21.5 percent expected it would take two to three years and 18.3 percent thought it would take one or two years. Somero suggested that Gen Zers could purchase a median priced property by saving up for an FHA loan with a 3.5 percent down payment by saving $252 a month for three years, but suggested that the respondents were "too conservative or ill-informed about their down payment options" to consider this possibility.
Despite these expectations, saving up for a down payment was not the primary concern among respondents. While a total of 20.9 percent said they considered this a potential obstacle to homeownership, 42.3 percent said they were worried about making enough money to own a home. Another 19.6 percent said their student loan payments might inhibit their homeownership plans.
Just over seven in 10 respondents—71.1 percent—said proximity to their workplace was an important consideration in choosing where they would like to live. A total of 51.9 percent rated proximity to friends and family as important, while 46.3 percent thought a neighborhood's crime rate was important to consider.
More than half the respondents—57.9 percent—said they would prefer to live in an ethnically and racially diverse neighborhood. The survey noted how this reflects the diversity of Generation Z as a whole, as nearly half are members of racial or ethnic minorities.
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