Q4 2019 Generational Propensity Report: Generation Z Enters the Housing Market

  • The Generation Z share of primary home loan originations is 2 percent, comparable to that of the Silent Generation
  • The median price of a home purchased by Generation Z buyers is $160,600, lower than $256,500 for millennials but growing more quickly
  • Generation Z is putting 5 percent down on their home purchases, on average
  • Top markets for Generation Z home shoppers are smaller midwestern and southern markets with a combined listing price that is 25 percent less than the nation’s median listing price

We already know that millennials have been growing up, establishing careers and families, and are buying the largest share of the nation’s homes. What’s next for the housing market? Well, the oldest members of Generation Z are now old enough to become homeowners themselves. Although Generation Z (defined as those born between 1997 and 2012) currently only generates 2 percent of mortgage loan originations, they have already caught up to the Silent Generation in home purchasing activity and will continue to ramp up purchasing as they too grow older and more established. This quarter, we take the first look at Generation Z home buying activity and how it might differ from the second-youngest millennial generation.  

 

Generation Z Home Purchasing Has Caught Up to The Silent Generation

Notably, Generation Z has begun to make waves in the market, now holding a 2 percent share, comparable to that of the Silent Generation. Millennials continue to grow their share of the housing market. At the end of the fourth quarter of 2019, the millennial share of primary home loan originations grew to 48 percent from 46 percent last December. The Generation X share continued to fall, to 32 percent from 34 percent last year, and the baby boomer share has remained constant at 17 percent. 

Figure 1: Share of Mortgage Originations by Generational Group

Share of Mortgage Originations by Generational Group

Generation Z’s share of primary home loan originations by total volume also grew from 0.8 percent last year to 1.4 percent this December. They are set to surpass the Silent Generation, which has a 1.5 percent share, early in 2020. The millennial share of primary home loan originations by total value also continued to increase. In December, the millennial share was 47 percent, up from 44 percent last year. The Generation X share fell to 35 percent from 37 percent and the baby boomer share fell to 15 percent from 16 percent. 

Figure 2: Share of Loan Origination Volume by Generational Group

Share of Loan Origination Volume by Generational Group

Generation Z Looking to Purchase Starter Homes

Generation Z, having only started its home buying journey, focused on purchasing inexpensive starter homes with a median purchase price of $160,600 in December 2019. Although they increased their median purchase price by 11 percent over the past year, Generation Z is still many years away from catching up to millennials both in life stages and housing budgets. 

The median price of a primary home purchased by millennials rose by 7 percent to $256,500 compared to last December. Millennials are increasingly purchasing more expensive homes at a greater rate than older generations, as Generation X and baby boomers only increased their purchase prices by 4 percent, respectively. 

A price gap between the generations persists but is narrowing, with Generation X buying homes that are $35,500 more expensive and baby boomers buying homes that are $13,500 more expensive than millennial purchases, compared to $45,000 and $19,900, respectively, the previous year. 

Figure 3: Median Purchase Price by Generational Group

Median Purchase Price

Figure 4: Year over Year Change in Median Purchase Price by Generational Group

Year over Year Change in Median Purchase Price

Lower Down Payments, Higher Debt Burdens Among Younger Generations Persist

Despite the gap in purchase prices narrowing between millennials and older generations, the gap in down payments remains stubbornly persistent. In December, the typical millennial contributed a down payment of 8.5 percent toward the purchase of their home, down from 9.0 percent last December, and less than the 11.5 percent and 17.6 percent contributed by the typical Gen X-er and boomer, respectively. Although the average down payment by Generation Z has been volatile due to less data, it has recently settled at an average of 5.0 percent. 

Figure 5: Average Down Payment (%) by Generational Group

Average Down Payment (%)

The median loan amount taken on by millennials continues to increase at a rapid rate. Millennials took a median loan amount of $242,100 in December, which is 8.4 percent higher than last year. The growth in mortgage debt undertaken by millennials continues to outpace that of both baby boomers, which grew by 3.6 percent, and Generation X, which grew by 1.8 percent. The median loan amount taken on by Generation Z, $154,000, grew by 7.0 percent. Although Generation Z is taking on increasing debt more rapidly than older generations, they are not scaling up as quickly as millennials.

Figure 6: Median Loan Amount by Generational Group

Median Loan Amount

The Hottest Housing Markets for Generation Z

We ranked housing markets by the current share of purchase home mortgages undertaken by each generation to uncover which markets are hotbeds for early Generation Z home buying activity. 

At the top end, Generation Z accounted for 5.4 percent of home loan originations in Toledo, OH; followed by Grand Rapids-Wyoming, MI (4.4 percent); and Wichita, KS (4.4 percent). Generation Z is showing a preference for lower-cost midwestern markets, with 5 markets in the top 10 being midwestern, 1 being northeastern and four being southern. Notably, the Gen Z share of mortgage originations is low in expensive western markets. The highest-ranking western market on the list was Salt Lake City, UT, in 17th place. 

The top 10 Generation Z markets had a combined median listing price of $224,500, which is 25 percent less expensive than the nation’s median listing price of $300,000. However, Generation Z home shoppers purchased homes at a combined median listing price of $130,000, 42 percent less expensive than the median home price in their respective metros. 

In December, we noted that the inventory for homes priced at under $200,000 was down 18.1 percent over the past year. Given that lower-cost entry-level homes are in short supply across the country, Generation Z will face some tough competition from millennials and other home shoppers in their search to find an affordable home. 

Table 1: Top 10 Generation Z Housing Markets

Metro Region Q4 2019 Generation Z Share of Loan Originations December 2019 Median Listing Price Q4 2019 Generation Z Median Purchase Price
Toledo, OH Midwest 5.35% $151,500 $91,333
Grand Rapids-Wyoming, MI Midwest 4.43% $284,700 $140,000
Wichita, KS Midwest 4.40% $199,250 $113,667
Virginia Beach-Norfolk-Newport News, VA-NC South 4.36% $304,050 $209,505
Winston-Salem, NC South 3.53% $275,050 $114,667
Scranton–Wilkes-Barre–Hazleton, PA Northeast 3.43% $159,950 $135,333
Oklahoma City, OK South 3.41% $250,050 $117,667
Cincinnati, OH-KY-IN Midwest 3.39% $259,950 $129,333
Youngstown-Warren-Boardman, OH-PA Midwest 3.32% $119,950 $86,487
Baton Rouge, LA South 3.14% $240,550 $165,333

Generation Z preferences are not exactly the same as millennials, however. Of the markets on Generation Z’s top 10 list, only Grand Rapids-Wyoming, MI and Baton Rouge, LA appeared on the top 10 list for millennials. In Figure 7, we mapped out the top Generation Z housing markets against the top millennial housing markets. San Francisco-Oakland-Hayward, CA; Boston-Cambridge-Newton, MA-NH; and Denver-Aurora-Lakewood, CO were the most different between the generations. All three markets made it to the top 20 markets for Millennials but ranked 81 to 98 for Generation Z, with high housing prices likely still shutting out Generation Z buyers. 

The top Generation Z markets which ranked lower on the millennial list include Winston-Salem, NC; Oklahoma City, OK; and Toledo, OH; all of which ranked in the top 10 on the Generation Z list but only 47 to 71 on the millennial list. 

 

Figure 7: Top Generation Z Housing Markets vs Top Millennial Housing Markets

 

Table 2: Largest 100 Metros, Ranked by Generation Z Home Loan Origination Share

rank Metro Q4 2019 Generation Z Share of Loan Originations Q4 2019 Millennial Share of Loan Originations December 2019 Median Listing Price
1 Toledo, OH 5.35% 49.79% $151,500
2 Grand Rapids-Wyoming, MI 4.43% 55.86% $284,700
3 Wichita, KS 4.40% 52.72% $199,250
4 Virginia Beach-Norfolk-Newport News, VA-NC 4.36% 51.23% $304,050
5 Winston-Salem, NC 3.53% 46.04% $275,050
6 Scranton–Wilkes-Barre–Hazleton, PA 3.43% 54.71% $159,950
7 Oklahoma City, OK 3.41% 48.49% $250,050
8 Cincinnati, OH-KY-IN 3.39% 52.15% $259,950
9 Youngstown-Warren-Boardman, OH-PA 3.32% 52.36% $119,950
10 Baton Rouge, LA 3.14% 58.70% $240,550
11 Louisville/Jefferson County, KY-IN 3.12% 44.03% $237,500
12 Des Moines-West Des Moines, IA 2.93% 51.85% $257,750
13 Akron, OH 2.85% 48.52% $151,000
14 Little Rock-North Little Rock-Conway, AR 2.78% 49.04% $199,950
14 Springfield, MA 2.78% 52.20% $274,950
16 Birmingham-Hoover, AL 2.73% 49.43% $249,950
17 Salt Lake City, UT 2.43% 56.94% $450,600
18 Colorado Springs, CO 2.39% 53.65% $439,851
19 Knoxville, TN 2.36% 47.11% $284,750
20 Tulsa, OK 2.27% 47.60% $249,500
21 Columbus, OH 2.23% 52.73% $274,850
22 Dayton, OH 2.21% 52.44% $162,295
23 Jackson, MS 2.17% 46.50% $249,950
24 Cleveland-Elyria, OH 2.15% 50.37% $179,950
25 Charleston-North Charleston, SC 2.14% 49.95% $414,550
26 Lakeland-Winter Haven, FL 2.12% 39.61% $231,300
27 Memphis, TN-MS-AR 2.07% 44.68% $233,163
28 Harrisburg-Carlisle, PA 2.05% 49.76% $237,013
29 Greensboro-High Point, NC 2.04% 41.71% $265,950
30 Phoenix-Mesa-Scottsdale, AZ 2.00% 39.14% $374,545
31 Indianapolis-Carmel-Anderson, IN 1.93% 48.54% $255,495
32 Richmond, VA 1.91% 44.03% $320,000
33 Greenville-Anderson-Mauldin, SC 1.86% 45.85% $265,050
34 Augusta-Richmond County, GA-SC 1.83% 49.99% $225,295
35 St. Louis, MO-IL 1.82% 52.20% $212,995
36 Rochester, NY 1.76% 51.93% $199,950
37 Portland-South Portland, ME 1.72% 54.42% $389,050
38 Syracuse, NY 1.68% 57.80% $174,950
39 Kansas City, MO-KS 1.67% 51.15% $300,050
40 Bakersfield, CA 1.66% 48.09% $259,995
41 Stockton-Lodi, CA 1.65% 41.06% $439,050
42 Madison, WI 1.64% 57.21% $348,750
43 Omaha-Council Bluffs, NE-IA 1.63% 51.92% $280,850
44 Las Vegas-Henderson-Paradise, NV 1.61% 37.07% $318,950
44 Baltimore-Columbia-Towson, MD 1.61% 52.26% $309,500
44 Urban Honolulu, HI 1.61% 51.83% $663,550
47 Spokane-Spokane Valley, WA 1.57% 48.98% $349,327
48 Columbia, SC 1.56% 44.82% $227,443
48 Chattanooga, TN-GA 1.56% 49.94% $294,950
50 El Paso, TX 1.53% 52.63% $193,775
51 Nashville-Davidson–Murfreesboro–Franklin, TN 1.52% 49.39% $367,855
52 Worcester, MA-CT 1.51% 53.09% $339,950
53 Deltona-Daytona Beach-Ormond Beach, FL 1.50% 33.99% $285,050
54 Minneapolis-St. Paul-Bloomington, MN-WI 1.48% 54.17% $349,950
55 Milwaukee-Waukesha-West Allis, WI 1.46% 57.07% $276,550
56 McAllen-Edinburg-Mission, TX 1.45% 59.55% $198,650
57 Atlanta-Sandy Springs-Roswell, GA 1.44% 44.61% $316,380
58 Albuquerque, NM 1.43% 42.51% $269,950
59 Pittsburgh, PA 1.41% 56.73% $189,750
59 Detroit-Warren-Dearborn, MI 1.41% 48.76% $225,050
61 Buffalo-Cheektowaga-Niagara Falls, NY 1.39% 57.42% $189,950
62 New Orleans-Metairie, LA 1.31% 50.72% $278,250
63 Allentown-Bethlehem-Easton, PA-NJ 1.28% 50.30% $239,500
64 Hartford-West Hartford-East Hartford, CT 1.27% 53.21% $274,950
65 Providence-Warwick, RI-MA 1.25% 49.48% $369,950
66 Boise City, ID 1.23% 40.20% $366,995
66 Houston-The Woodlands-Sugar Land, TX 1.23% 48.58% $300,044
68 Chicago-Naperville-Elgin, IL-IN-WI 1.22% 50.99% $299,300
68 San Antonio-New Braunfels, TX 1.22% 46.19% $284,850
70 Cape Coral-Fort Myers, FL 1.15% 31.31% $318,700
71 Albany-Schenectady-Troy, NY 1.14% 56.35% $295,000
72 Charlotte-Concord-Gastonia, NC-SC 1.13% 45.91% $339,300
73 Jacksonville, FL 1.11% 40.36% $310,543
74 Tampa-St. Petersburg-Clearwater, FL 1.08% 38.81% $277,000
75 Seattle-Tacoma-Bellevue, WA 1.03% 51.93% $582,050
76 Palm Bay-Melbourne-Titusville, FL 1.00% 31.83% $299,050
77 Fresno, CA 0.98% 52.30% $326,350
77 Portland-Vancouver-Hillsboro, OR-WA 0.98% 49.37% $469,500
79 Riverside-San Bernardino-Ontario, CA 0.97% 42.51% $405,494
80 Tucson, AZ 0.94% 37.77% $287,550
81 Denver-Aurora-Lakewood, CO 0.91% 54.96% $497,550
82 Philadelphia-Camden-Wilmington, PA-NJ-DE-MD 0.90% 54.20% $288,300
83 Washington-Arlington-Alexandria, DC-VA-MD-WV 0.89% 49.11% $470,050
83 North Port-Sarasota-Bradenton, FL 0.89% 25.99% $369,500
85 New Haven-Milford, CT 0.88% 51.74% $259,950
86 San Diego-Carlsbad, CA 0.81% 48.92% $719,494
86 Dallas-Fort Worth-Arlington, TX 0.81% 45.16% $335,550
88 Bridgeport-Stamford-Norwalk, CT 0.77% 47.45% $699,050
89 Raleigh, NC 0.70% 45.50% $362,500
90 Austin-Round Rock, TX 0.60% 51.32% $350,025
91 Boston-Cambridge-Newton, MA-NH 0.59% 53.91% $589,950
91 Orlando-Kissimmee-Sanford, FL 0.59% 41.61% $317,698
93 New York-Newark-Jersey City, NY-NJ-PA 0.48% 48.86% $551,530
94 Sacramento–Roseville–Arden-Arcade, CA 0.43% 43.54% $495,050
95 Los Angeles-Long Beach-Anaheim, CA 0.41% 36.84% $877,550
96 Miami-Fort Lauderdale-West Palm Beach, FL 0.40% 40.57% $405,050
97 Durham-Chapel Hill, NC 0.26% 47.20% $389,050
98 San Francisco-Oakland-Hayward, CA 0.20% 54.70% $897,050
99 Oxnard-Thousand Oaks-Ventura, CA 0.07% 42.36% $794,525
100 San Jose-Sunnyvale-Santa Clara, CA 0.00% 47.04% $1,074,800

Methodology

The Report on Loan Originations by Age and Generational Groups is based off of a Realtor.com analysis of a sample of residential mortgage loan originations from Optimal Blue. The top market rankings were calculated using a group’s mortgage origination share.

The generational groups are defined as follows:

  • Silent Generation: born before 1946
  • Baby Boomers: born between 1946 and 1964
  • Generation X: born between 1965 and 1980
  • Millennials: born between 1981 and 1996
  • Generation Z: born between 1997 and 2012

 


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