Generation Z is here, and they’re fast on the heels of their elders, the millennials of Generation Y. While millennials have only just begun to dominate the housing market, experts are already looking ahead at what the younger Generation Z will do differently. For title and appraisal industry folks, as well as lenders and real estate agents, a reliable forecast for the future is a topic of interest.
So what are the experts saying? So far, a lot of good things.
Gen-Z: An Intro to the Next Generation
While it may seem that millennials are still quite young, they’re growing up fast. The youngest millennials are already well into adulthood. Following Generation Y’s cohort, born between 1980 and 1995, Generation Z-ers, defined as those born between 1996 and 2010, are now between the ages of six and 20.
While each generation develops its own character, group identity isn’t, as Pew noted, formed in a vacuum. Since 1996, the country has experienced an explosion of technological advancement, the growth of instant connectivity and social media, the threat of terrorism and other domestic security concerns, protracted foreign wars, and a number of financial highs and lows, from the Dot Com boom and bust to an economic recovery that more recently saw the Dow reach record highs.
These world events have shaped Gen-Z into different people than their older siblings, the millennials. A New York Times piece last year noted that if the millennial story was one of “innocence lost,” the Gen-Z story was about pragmatism: conscientious, hard-working, and “mindful of the future.”
At 60 million native-born Americans, Gen Z is said to be about two percentage points larger than the already sizable millennial generation, according to Susan Weber–Stoger, a demographer at Queens College. Author Neil Howe told the Times he calls the group the “Homeland Generation” due to world events and an increasing focus on child safety and security by Gen-X parents. There have even been comparisons to the Silent Generation of Americans born during the Great Depression, causing some to wonder if Generation Z will give rise to another 1950s-style era of prosperity and expanded homeownership. Some early indications point that way.
Generation Z and Housing
A survey taken in 2014 by Better Homes and Gardens showed that 82 percent of 1,000 Gen-Z respondents said homeownership was the “most important factor in achieving the American Dream.” The survey group of 13- to 17-year-olds also looked positively on other aspects of traditional American success. Seventy-eight percent said graduating from college was important, 71 percent said getting married was important, and 68 percent said having children was important.
Despite their pragmatism, Gen-Z survey respondents also showed signs of optimism. Ninety-seven percent believed they would one day own a home, and indicated they were willing to make sacrifices to make homeownership a reality.
If the survey results are to stand the test of time, Generation Z should approach real estate professionals with more realistic expectations for their first home, while also challenging them to become more technologically savvy.
Researchers asked the group how much they’d pay for their first home. Averaging the answers, the report showed Gen-Z teens expected to pay a price of $274,323 for their first place. The researchers noted contemporary Census data was a close match, with the median home cost coming in at $273,500.
As most of the generation’s life has been online, it’s no surprise respondents expected to buy a home online, too. Twenty-nine percent anticipate video chatting with their real estate agent, and 19 percent believe they’ll buy their first home over the internet.
Lessons from Millennial Predictions
Of course, folks in the real estate industry would be wise to take in such Gen-Z analyses as the predictions they are and remember they could be subject to error. Only a few years ago, experts were sure millennials would be foregoing car ownership according to researchers at Goldman Sachs and becoming perpetual renters according to Forbes. There was also a persistent myth that Gen-Y would be flocking to high-rise apartments in walkable downtown districts in cities.
Over time, these predictions for millennials, which were radically different from those of previous generations, proved overstated. As the Urban Land Institute noted, experts evolved to see millennials tracking more closely to previous generations on homeownership, though delayed by economic factors. In October, HousingWire even noted that millennial “homeownership dreams” were at long last “coming true in the data.”
So we could see a similar pattern happen with Gen Z. Perhaps they won’t be as pragmatic as they say they will. Perhaps they’ll loosen up in their 20s, worrying the experts for a few years, before settling down with families in their 30s, like the many generations before them. Only time will tell.