Not too long ago, being able to afford a home in your early-to-late twenties was the regular American Dream; however, with an increase in mortgage rates and rent prices along with the influx of higher interest rates, Gen Z may be experiencing a dream deferred. 

The COVID-19 pandemic marked a change in the homebuying process for many young Americans, especially Gen Z. In a now post-COVID world, homebuying is an area where the nation is struggling; with the median sale price for a home increasing 25% between 2020 and 2021. This rise in home prices has been impacted by many factors, with inflation being the primary driver of homeownership insecurity.  

With the Federal Reserve increasing interest rates to a range of 5.00% to 5.25%, higher mortgage rates are seen across the country meaning higher monthly payments for homeowners. For those who were not able to partake in the opportunity of lower interest rates during the peak of COVID-19, this increase in mortgage rates may leave them out of the picture all together. Looking at current housing prices there have been significant increases, with the median sale price of a home being $436,800; an over 100k increase from the first quarter of 2020. Seeing such stark changes in such a short span of time along with the continued financial crisis that the country has been enduring that includes the debt ceiling, much of Gen Z is losing their optimism. Much of Gen Z feels they can only afford a home that is at or under $200,000. With home prices continuing to skyrocket, depending on the state and city in which a younger adult lives, this will continue to create a sense of pessimism on the likelihood of homeownership, further contributing to the wealth gap—especially for Black and Brown first time homebuyers. This has even increasingly been witnessed outside of major cities including in the South. In Louisiana, the average home price as of May 2023 was $257,400, slightly above the general price market for a Gen Z homebuyer.  Although there are numerous hoops that Gen Z is facing in the homebuying process they are not giving up homeownership altogether. Many in this generation still lead with the hope of homeownership within the next 3 years considering the increase in starting salaries post-college.  

The solutions begin with more states creating housing programs that have the potential to increase homeownership among young people and especially families of color in neighborhoods from which they have historically been excluded.

While Gen Z remains hopeful, interest rates are still a crucial factor to the buying process as well as necessary income to afford down payments and other expenses that impact homeownership retention. While they are seeing higher starting salaries, the competitive and always fluctuating job market may make it hard to land these higher paying jobs.  A lack of houses on the market is also a pivotal issue behind the high home prices. Take Maryland for example, the number of homes for sale was down 16.5% in April of 2023 and the number of new homes on the market being down 25.2%. These significant decreases make it harder for Gen Z to afford a home with their being less supply, more demand, and a competitive housing market that does not reflect the cost of living.  

With there still being much dialogue and frustration centered on how hard it is for Gen Z to become a homeowner and the subsequent lack of housing supply, this leads to the inquiry of what is next for this future generation of homebuyers. The solutions begin with more states creating housing programs that have the potential to increase homeownership among young people and especially families of color in neighborhoods from which they have historically been excluded.  At the state and local level, reversing harmful and exclusionary zoning practices to allow for the development of more affordable housing is a key solution in creating more housing availability for all. With Gen Z being our youngest adult population, we must continue to invest in their engagement in our economy and ensure a pipeline to financial security, with homeownership being an option to their pathway to prosperity.