2020 has been an unpredictable year, to say the least. As we head for 2021, it’s important to take stock of some of the major factors influencing the real estate market here in Chicago and around the country — including generational trends among buyers. In particular, younger buyers are helping to drive the market forward right now, and shaping what we may expect to see in the years and decades to come.
This includes not only Millennial homebuyers — defined by Pew Research Center as those born between 1981 to 1996 — but also members of Generation Z. Pew defines Gen Z broadly as anyone born after 1996; this would make Gen Z-ers 24 or younger as of 2020.
Gen Z and Millennials: Putting Their Mark on the Market
Younger buyers have made up the largest share of homebuyers for some time. According to the National Association of REALTORS© (NAR) 2020 Home Buyer and Seller Generational Trends Report, Millennials as a whole made up the largest share of homebuyers over the past year, representing 38% of buyers. According to NAR, this marks “the seventh consecutive year the group represented the most active generation of buyers.”
Meanwhile, data from realtor.com indicates that Gen Z bought about the same percentage of the homes on the market as members of the Silent Generation in late 2019. Members of Gen Z also spent 11 percent more on real estate than they did during the same period for the previous year; Millennials spent about 7 percent more for the period, year over year.
Market experts also predict that Gen Z homeownership will continue to climb in the years to come. A 2019 survey of more than 100 economists found that a large share of housing experts “expect the share of Gen-Z who will be homeowners in 15 years will be bigger than the share of Millennials who currently own their homes,” according to MarketWatch.
How Gen Z and Millennials are Navigating the Current Market
In addition to long-term trends, research suggests that Millennial and Gen Z buyers are navigating our current situation by being proactive and taking advantage of favorable market conditions — including interest rates that continue to hover near record lows.
Data from Eye on Housing, presented by the National Association of Home Builders (NAHB), indicates that 14 percent Gen Z adults planned to purchase a home as of Q3 2020 — up three points from the same time period in 2019. According to the NAHB, Millennials remain the most likely of all generations to be considering a home purchase right now, at 22 percent — up from 20 percent during the same period in 2019.
Gen Z-ers and Millennials also represent a large share of first-time buyers, according to data from the NAHB. Roughly 81 percent of the members of Gen Z who are planning to buy a home are first-timers, according to the NAHB, along with 64 percent of Millennials — significantly higher than the 45 percent of Gen Xers and 24 percent of Baby Boomers who are pursuing ownership for the first time.
Beyond low interest rates, a few other trends are making Millennials and Gen Z uniquely equipped to navigate the current marketplace. For one thing, a large portion of Millennials are reaching what experts call the prime homebuying years — generally considered to be around 29-33 years old, the longtime median age range for first-time homebuyers.
Meanwhile, Gen Z-ers and Millennials are confident about using technology to conduct their search for a new home. 40 percent of buyers aged 20-29 started their search by looking for properties online, according to data from NAR; 97 percent of this age group said they used a website at some point in their search, with 24 percent saying they also used a video site and 85 percent saying that they utilized a mobile app.
What are Gen Z and Millennial Buyers Looking for?
Many are eyeing the COVID-19 pandemic as the beginning of a meaningful shift in buyer preferences. But long before the pandemic, MIllennial buyers have expressed a clear preference for the types of homes that they’re interested in — favoring energy efficiency, low maintenance fees, smart home technology, lots of outdoor space, and convenient locations that put them close to shopping, nightlife, and public transportation.
And while Millennials have faced undeniable hurdles on their journey to homeownership, surveys and studies over the years suggest the majority of Millennials still see it as a worthwhile goal, and view owning a home as an opportunity to take control of their living space and receive increased privacy and security, compared to renting.
More recently, a growing body of research shows that members of Generation Z share similar positive perceptions of homeownership. A recent study from Freddie Mac suggests that a significant majority of Gen Z (86 percent) want to own a home someday. Gen Z-ers estimate that they will be able to make their first home purchase around 30 years old, and a large share see homeownership as a sign of success (86 percent) and a way to gain independence and control (88 percent). Gen Z-ers also have a less favorable view of renting than Millennials did at the same age.
Meanwhile, members of Gen Z anticipate sharing some of the same hurdles as Millennials, including student debt. About 65% of Gen Z say that they are not confident in their knowledge of the mortgage process, but 58% would consult with a real estate agent to learn more.
And when it comes to working with a real estate professional, a whopping 79 say that they would rather have face-to-face interactions with professionals than carry out the process fully online, according to Freddie Mac. According to a survey from Homes.com, reported by Realtor Magazine, Gen Z-ers want to work with a real estate professional who knows what they want (27.1 percent), is knowledgeable about the local market (18.1 percent), and has experience (15.2 percent).
That same survey also found that members of Gen Z are enthusiastic about buying homes in culturally diverse neighborhoods, and view their top priorities when choosing a place to live as proximity to work (71 percent), proximity to friends and family (52 percent), and overall location (25 percent).
Ready to Start Exploring the Chicagoland Market? We’re Here for You.
Interested in starting the search for the home that will be the right fit for you? Baird & Warner is here to help.
While it’s hardly business as usual, we know that the Chicagoland real estate market is still strong. The market is moving — and if you’re ready, you can too.
During this extraordinary time, the professionals at Baird & Warner, Key Mortgage, and Baird & Warner Title Services are here to help homebuyers and sellers achieve their biggest real estate goals, while making the process easier at every step of the way. At Baird & Warner, 165 years of history have taught us how to overcome even the most adverse conditions. We’re by your side — no matter what.