Although the dream of homeownership has survived high mortgage rates and hot home prices, most Americans believe they would need a lucky boost to afford it, according to a recent survey.
About two-thirds of Gen Zers and millennials surveyed believed that buying a home within the next five years is still a realistic goal, according to the Zillow survey. Still, affordability is why more than half of them who don’t currently own a home believe they’d need to win the lottery to afford one.
Some of the biggest hurdles to housing are high mortgage rates and limited housing supply. Mortgage rates have fluctuated within the 6% to 7% range since the beginning of the year, well above last year when the average was 5%.
Homes newly listed for sale in March decreased by 20.1% compared to the same time the previous year, and new listings remained 29.7% below pre-pandemic 2017 to 2019 levels, according to a recent Realtor.com report.
“These findings highlight the gap between Gen Z and millennials’ dream of owning a home and their ability to actually make it happen,” Amanda Pendleton, Zillow’s home trends expert, said in a statement. “Mortgage rates have been on the rise since last year, sending monthly housing costs through the roof — the typical monthly mortgage payment is now $431 higher than a year ago.
“Combine rising rates with record-breaking home value appreciation, and it’s easy to understand why younger generations are wondering how they’ll ever be able to afford a home,” Pendleton continued.
If you want to take advantage of interest rates before they potentially go up, you could consider shopping for the right mortgage. Visit Credible to speak with a mortgage expert and get your questions answered.
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Down payment remains a challenge for Generation Z
House hunters today aiming to put a 20% down payment on the typical U.S. home, which averages $334,944, would have to save about $67,000, according to Zillow. In a more expensive market, reaching that goal can exceed six figures.
For many, raising the funds for a 20% down payment remains a significant challenge. Thirty-six percent of Gen Zers said they would even trade in their social media if it meant they could have enough cash to put down a home, according to the survey. However, a 20% down payment is usually optional in many cases.
“The Zillow report indicates that the younger generations are not aware of the multitude of options available for buying a home,” Arrive Home CEO Matt Pettit said. “For example, you don’t need to play the lottery to qualify for down payment assistance. After all, saving up for a down payment is often cited as the largest obstacle to buying a home, so there are opportunities for assistance there when the homebuyer works with their loan officer in choosing the right mortgage for themselves.
“Homebuying doesn’t have to be a gamble, but it does have to be a well-researched decision,” Pettit said.
If you’re buying a home or looking to refinance your current mortgage, you can visit Credible and compare multiple mortgage lenders to find the right option for you.
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More reliable steps to buy a home
Most first-time homebuyers understand that buying a home in the current market may require more effort than just leaving it to chance.
For example, 95% of Gen Zers and 94% of millennials understood that they would have to make life changes to afford a home. About 40% of millennials said they would need a side hustle or two, and 28% of Gen Zers say they’d have to make a career change to reach the goal of homeownership.
Here are other proven measures that can make the dream of homeownership a reality:
Boost buying power by improving your credit
Buyers can save additional money on home financing by understanding and improving their credit profile. A separate Zillow analysis showed that borrowers with an “excellent” credit score — between 760 and 850 — could be saving up to $103,626 in mortgage interest payments over the life of a 30-year fixed-rate loan, based on a typical home priced at $354,165.
Know what you can realistically afford
Having a realistic goal on the type home you can afford can help set you up for success. That figure should include all-in monthly costs instead of looking at list prices.
Zillow recommended that buyers start with a mortgage calculator and affordability tools to understand what goes into a mortgage payment and what they can realistically afford on a monthly basis.
If you’re ready to shop around for a mortgage loan, you can use the Credible marketplace to help you easily compare interest rates from multiple mortgage lenders and get prequalified in minutes.
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