Gen Z Can't Afford to Become Homeowners in Major Cities as Property Prices Continue to Surge

For older generations owning a home used to be just another step forward on the path to having a successful life and financial stability. As times changed, it became a dream for most millennials, since they were less likely to buy a home in their 30s, as compared to boomers. Things have only become even harder for Gen Z, as most of them are starting off with their careers. A significant portion of these young professionals are yet to become homeowners, and census data indicates that only 17% of Gen Z adults currently own any kind of real estate. This trend can be attributed to various factors, including a desire for location independence, and a preference for saving money, but more than all of that, financial constraints prevent them from affording a home.

In areas where home prices are high and mortgage rates are steep, affordability becomes a major obstacle to homeownership for this demographic. "Non-homeowners cite insufficient income, high home prices, and not being able to afford a down payment or closing costs as the most common barriers to becoming a homeowner," Bankrate's chief financial analyst, Greg McBride, said.

In Fremont, California, for example, the home price-to-income ratio is a staggering 22.8, making homeownership close to impossible for these individuals. Similarly, in San Diego, the ratio stands at the same level, while in Lexington, Kentucky, the ratio is comparatively lower at 11.4.

Other factors such as a high proportion of homes selling above listing price and a relatively low homeownership rate for Gen Z also contribute to the challenge of purchasing a home. San Jose and Riverside in California present formidable obstacles to homeownership, with high home price-to-income ratios and other unfavorable market conditions.

"High and rising home prices can contribute to the feelings of not having enough income or savings accumulated to buy a house," stated McBride.

In bustling cities like New York City, the dream of homeownership remains a distant reality for many. The city's soaring housing prices, exemplified by Manhattan's staggering median sale price of $1,125,000, pose a significant barrier to entry for young homebuyers.

Queens and Staten Island, however, offer a middle ground in terms of housing metrics, with Staten Island particularly noteworthy for its relatively high share of Gen Z homeownership, surpassing 26%. 

Despite their desire for homeownership, the combination of soaring home prices, limited inventory, and challenging economic conditions makes it extremely difficult for Gen Z to achieve this milestone. As a result, many individuals may find themselves renting or living with family for an extended period.

A recent survey unveiled that a remarkable 68% of Gen Z adults are choosing to live with their families, alongside 20% of millennials, who are also continuing to reside in their family homes. This inclination towards multigenerational living arrangements represents a significant demographic shift, with an estimated 51 million individuals currently living in such households.

The survey further indicates that over 40% of both millennials and Gen Zers feel that they will be sticking to such living arrangements for at least two years to come.