The difficult housing market conditions of today appear to be taking their toll on Generation Z, according to a new survey from Freddie Mac.
The government-sponsored enterprise last fielded a similar survey in 2019, and like in the previous iteration, Gen Z adults indicated that they prefer homeownership over renting due to a variety of reasons. These include the belief that owning a home is something to be proud of (with 95% indicating such), provides more privacy (96%), and allows for more control and independence (92%). Relatively few Gen Z adults, on the other hand, are “scared off” by the prospect of owning a home, with only 39% of adult survey participants indicating that homeownership is too much responsibility.
But while 27% of Gen Z adults in the 2019 survey indicated that homeownership is “out of reach financially,” that share rose to 34% in the newest survey, conducted in March and April of this year. And the share grew even further when narrowing the lens to minority demographics, including Black (35%) and Hispanic (50%) respondents.
“Currently in the housing market, we’re seeing rising mortgage rates, insufficient supply and elevated house prices bringing about significant affordability challenges,” said Pam Perry, single-family vice president of equitable housing at Freddie Mac. “Gen Z has taken notice and their hopes of homeownership have waned as the potential issues they may face in purchasing a home have become front and center.”
According to this year’s survey, the top five hurdles to homeownership identified by Gen Z adults are saving for a downpayment (39%); not having a sufficient credit history (27%); an unstable job situation (27%); student loan debt (22%); and credit card debt (11%).
This year’s survey data also shows that Gen Z adults, many of whom may see themselves as presently stuck in the renter pool due to affordability woes, see that renting has several perks of its own. These positives include flexibility (76%), being close to the “action” (65%) and less stress than owning (63%).
The benefits of renting are most widely acknowledged by Black and Hispanic adult survey participants. Many of these people view renting with pride (71% and 49%, respectively) and as a way to build community (41% and 43%, respectively).
Black and Hispanic survey respondents were more likely to say that owning a home is too much responsibility, indicating potential gaps in financial education and homeownership preparedness. Eighty-nine percent of Gen Z agreed that they have “good role models … who demonstrate financial responsibility, including 88% of Hispanic and 82% of Black respondents. But the survey also found that minority participants were behind other cohorts with some facets of early financial instruction.
Eighty percent of Black Gen Zers, for example, said that their parents talked to them about managing their finances, “significantly” lower than the 87% share of white Gen Zers, Freddie Mac noted. And only 71% of Black Gen Zers said that their parents started teaching them about money early in their lives, compared to 79% of white Gen Zers and 80% of Hispanic Gen Zers.
Meanwhile, 64% of Hispanic respondents to Freddie’s survey said they “have worried about [their] family’s financial situation before,” compared to only 45% of White respondents. Such challenges, according to Perry, present barriers to homeownership that the agency continues to monitor and find ways to combat.
“Freddie Mac has been following this emerging generation closely and leading the industry to help solve for potential challenges that this group may face,” she said. “Freddie Mac is doing this with efforts like low-downpayment mortgage products, credit-building initiatives and our financial capability curriculum, CreditSmart.”
