Many of the norms and habits that followed the pandemic have led some to question whether younger generations, Generation Z in particular, will still see homeownership as the American dream. This worry has been supported by the rising trend of the digital nomad, the fact that more Americans are still living with their parents during their twenties, and the market challenges of low inventory and affordability since the pandemic. Additionally, fewer members of the younger generations consider homeownership to be a key component of the American dream compared to their parents. Sentiment among baby boomers (84%) and Generation X (76%) is much higher compared to millennials (66%) and Generation Z (63%).
While those statistics and trends paint a negative picture, they fail to tell the full story. It would be a mistake to believe that sentiment towards homeownership simply did not transfer to younger generations, and there is reason for optimism that it will continue to be a key component of the American dream.
The Impossible Dream
The reality is that the fall in millennial and Generation Z sentiment toward homeownership is likely based on a lack of belief that homeownership is attainable for them rather than a lack of desire. In fact, more than half of Americans in these generations who do not currently own a home do not believe it is feasible for them, with 73% of aspiring homeowners citing affordability as their primary obstacle. This is due to lower inventory levels, higher home prices, increased student debt, and lost earnings for a decade following the Great Recession.
Only 42% of millennials at age 30 were homeowners, compared to 48% of Generation X and 51% of baby boomers when they were the same age. There is reason to expect Generation Z will follow this trend as their entry into the workforce was met by a pandemic, an uncertain job market, and an unprecedented challenging residential real estate market, which offers limited inventory, high mortgage rates, and challenges of affordability.
Baby Boomers are Staying Home
Not only do baby boomers overwhelmingly believe that owning a home is part of the American dream, but 77% of Americans over 50 say they are determined to keep their homes. This is due to the fact that they are healthier living longer than their parents and choosing to put off retirement. This trend is playing a role in influencing inventory rates and rising prices in some markets.
Baby boomers are simply not feeling the same financial stress as their parents to downsize or move to a cheaper retirement community since they are putting off retirement and have accumulated significant wealth over the course of their careers. Not to mention that most have already paid off their mortgages, and feel that their home is a tangible real estate asset that they feel is worth keeping in the current market.
There is one incentive for baby boomers to help solve the issue plaguing millennials and Generation Z. The reality is they are instrumental in ensuring that homeownership will continue to be part of the American dream for their children.
Providing Support for the Next Generation of Homebuyers
Given the challenging market and financial constraints, younger generations will look to their parents for help and guidance when it comes to homeownership. In fact, it has already started as multigenerational homes have been on the rise, while 78% of Generation Z and 54% of millennials have relied on their parents for financial support to cover a down payment. This is already changing the way many Americans choose their starter homes. Given the significant wealth gap between generations, it should be expected that this reliance will continue.
As we experience the largest transfer of wealth in history over the next 15 years, some baby boomers may include their homes as part of their financial gifting plans. This can be viewed as solely a transaction of a financial asset. But, if they continue to provide support for their children now, not just after their death, they can pass along their sentiments and show their children that homeownership is still attainable as part of the American dream.
Keeping the Dream Alive
There will be continued challenges to keeping homeownership as a driving force for the American dream. But it is clear that all generations have a desire for it to stay an important component. In order to achieve this shared outcome, all generations must keep a long-term perspective on the issue, and collaborate on finding new ways to support each other in the aspiration of owning a home. That is the best way for the dream of homeownership to stay achievable for generations to come.
Katelyn Castellano is the SVP of Marketing at Engel & Völkers Americas.
This column does not necessarily reflect the opinion of HousingWire’s editorial department and its owners.
To contact the editor responsible for this piece: zeb@hwmedia.com
