Gen Zers and Millennials are finding it increasingly difficult to afford homes in today’s market. A recent survey from Northwestern Mutual found that 53% of non-homeowners believe owning a home will never be financially feasible. The National Association of Realtors reported that the typical age of a homebuyer has risen to 56, up from 49 the previous year.
This trend highlights the challenges younger Americans face when entering the housing market, as they often have less access to the necessary capital. The costs of homeownership have skyrocketed in recent years, making it particularly challenging for Gen Zers and Millennials. The median list price in February was $412,000, a 39.2% increase since February 2019.
The price per square foot has risen even more dramatically, up 54.8%. Although mortgage rates have decreased since their peak in mid-January, the average rate for a 30-year fixed-rate mortgage was 6.65% as of last week. This high rate continues to deter many potential buyers.
Young Americans’ homeownership struggles
With inflation remaining above the Federal Reserve’s target rate of 2%, experts predict that interest rate cuts may not occur until at least the summer, meaning high mortgage rates could persist. In addition to housing affordability issues, households are struggling with inflation, which is the top financial concern for most people, according to Northwestern Mutual.
This makes it harder for them to save money. The survey found that non-homeowners cite several reasons for believing homeownership is unaffordable:
– 64% don’t have enough saved for a down payment
– 48% say mortgage rates are too high
– 43% believe the housing market is too competitive
Gen Zers who do not own homes are slightly more optimistic than older non-homeowners. While 58% of Millennials say homeownership is not an affordable goal, the percentage is lower (49%) for Gen Z non-homeowners.
John Roberts, Northwestern Mutual’s chief field officer, said in a news release, “When it comes to whether people believe they can afford to own a home, age is a big factor. Gen Zers are still young and have more time to reach a place where home ownership feels attainable.”
The dream of homeownership is becoming increasingly out of reach for many young Americans due to rising home costs, high mortgage rates, and persistent inflation. While Gen Z remains somewhat hopeful, many Millennials have grown deeply skeptical about their ability to afford a home.
Today’s economic challenges are redefining the American Dream for generations to come.
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