Real estate markets have been riding a rising wave of favorable demographics for over a decade. Since the 2008-09 housing bust, demand for housing has been growing at a strong pace. Millennials were dubbed the “renter generation,” and expected to shun ownership. Millennials were opting instead to rent apartments in high-density downtowns, use public transit, bikes, electric scooters, or ride-hailing services for their transportation. They were also trying to avoid the suburbs of their parents.
In reality, it became clear that stage-of-life changes led to a natural evolution in preferences and behaviors. Along with children and families, millennials embraced homeownership, and have been the dominant force behind real estate activity for the past few years.
This perspective is important as we welcome the youngest cohort into adulthood. In addition, we should discuss how its members relate to real estate markets and the broader economy. The data shines a spotlight on a cohort still working its way through college, or on the early path of its professional trajectory. Interestingly, however, Gen Z values homeownership. A majority of “Gen Z’ers” state that they would prefer to buy instead of rent their homes in the long term.
Gen Z adults are taking the first steps into adulthood:
Over half of Gen Z lives in suburbs and prefers them to downtown:
Millennials moved to urban downtowns in large waves during the early years of their careers. This has lead to the urban renaissance of the 2010s. This has also prompted many companies to leave suburban office parks for glass-shrouded buildings in central business districts. However, as they matured and looked for affordable housing to accommodate growing families, many millennials found downtowns unaffordable. Therefore, many of them have been moving to the suburbs. The pandemic accelerated the shift over this past year.
For Gen Z, the suburbs are not only where 51% of them currently live. This is also where 49% prefer to be of those who plan to buy in the future. Thirty-five percent of Gen Z adults live in urban centers. And, only 32% of those who want to buy at some point plan to purchase a home in a high-density downtown.
Implications for housing:
As the Gen Z cohort matures over the coming decade, it’s expected to play an increasing role in the economy and real estate markets. Based on preliminary research, the generation seems to share many common traits with millennials. They are highly educated, digital natives, diverse, and socially active. Given their stated preference for homeownership at an early stage, the housing industry should be prepared for millions of Gen Z buyers to bring a new wave of demand. These cohort is along a similar stage-of-life timeline as the millennial generation before them. With the intense shortage of available homes for sale, it seems imperative that we consider measures, especially at state and local levels, to ease the burden and costs of building affordable housing over the next 10 years.
This offers us great insight for the coming years as Gen Z takes a more active role in the market. In addition, it highlights the fact that investing in real estate will be important in the coming years. If you are looking to buy in this current market, reach out to us today!