Gen Z Can’t Afford to Buy Houses, and Millennials Are to Blame (2024)

FAQs

Why won t millennials be able to afford houses? ›

Key Takeaways. Millennials are not buying homes as readily as the previous generation. Delaying marriage and having children is keeping many Millennials at home with their parents. Tighter lending criteria can also make homeownership unaffordable or virtually impossible for those without much credit history.

Despite Increasing Salaries, Gen Z and Millennials Can't Afford Houses. “This is a resilient response to the very dramatic increase in rental burden. The average proportion of a person's income that goes to rent was 25% in 2000, and it's now 40%. That's really a striking increase,” Wachter said.

Gen Z Struggles With Mental Health

According to McKinsey, over half (55%) of Gen Zers report having either been diagnosed or receiving treatment for a mental health condition, compared to 31% of people aged 55 to 64, who have had decades longer to seek and get treatment.

Home prices have doubled in the last decade, with much of that growth happening in just the last four years. By one measure, housing affordability has fallen to its lowest level since the 1980s. And high interest rates have exacerbated the problem, ballooning monthly mortgage payments.

Worrying about saving has always been hard for 20-somethings who begin their careers at the bottom of their earning potential. But saving is especially difficult right now because on top of student debt, housing and food costs remain high even as inflation has started to cool.

A sizeable portion of Millennials (22 percent, approximately 17.8 million people) are Financially Vulnerable; these individuals are struggling with most, if not all, aspects of their financial lives.

Gen Zers face greater obstacles to financial success

Not only are their wages lower than their parents' earnings when they were in their 20s and 30s, but they are also carrying larger student loan balances.

Retirement doesn't seem possible for a quarter of Gen Z

Generation Z faces an uncertain financial world, and they're well aware they likely won't have the same benefits as generations that preceded them.

Dependence on technology: While tech-savvy, Gen Z's heavy reliance on technology can sometimes lead to difficulties in adapting to environments where technology is limited or different systems are in place.

Which generation is struggling the most? ›

Not just growing pains: Gen Z reports suffering more than other generations did at their age. A new study from Gallup shows a crushing youth mental health crisis, because teens are more tuned in than ever.

Young Americans are finding themselves digging a deeper and deeper financial hole. Gen Zers risk starting further and further behind previous generations building a life for themselves as soaring rents chew into their disposable income, leaving them deeper in a financial hole they are still digging.

Build your credit

It's all about the credit score. The average FICO credit score for Gen Zers is 679. To qualify for the most competitive interest rates, experts recommend closer to 740. Though building your credit score can take some time, it can make homeownership much more affordable in the long run.

Many have struggled with recent rent hikes, and say they have no savings to fall back on. Stagnant wages, student loans, and low economic mobility created a perfect storm for millennials.

Keep your monthly payment to no more than 25% of your take-home pay. If you're a first-time home buyer, put at least 5–10% down. But 20% or more is even better because you'll avoid paying PMI! Pay for closing costs and moving expenses with cash.

Researchers claim the distribution of wealth among millennials is so uneven because the economic rewards for middle and upper-class lifestyles have increased, while those for the working class have either remained the same or declined.

Instead of pursuing the traditional American Dream, Millennials believe that their wealth will be in their savings account and, most importantly to them, the experiences they gain while living. As such, the short-term costs of renting are far easier to bear than those that come with purchasing a home.

One of the chief factors contributing to lower rates of millennial homeownership is the overall cost of housing in the U.S. For nearly half a century, household incomes rose far slower than the price of a new home when adjusting for inflation.

Because of limited budgets brought on by their student loans millennials are delaying getting married (if at all) and having fewer children (or none at all) and later in life than previous generations. Because of their smaller families and limited budgets, they are buying houses later and seeking smaller ones.