25 and Ready to Buy? We’ll See with Gen Z
Florida Realtors economist: Gen Z (oldest members turn 25 this year) faces unique obstacles with a pandemic marking their entrance into adulthood. Here’s what we know right now about their homeownership potential.
ORLANDO, Fla. – Every generation has a defining event. What feelings resonate when you hear about the JFK assassination, the fall on the Berlin Wall or 9-11? Research from the Center for Generational Kinetics (CGK) indicates that the COVID-19 pandemic is that moment for Gen Z.
The eldest members of Gen Z turn 25 years old next year and are beginning to consider homeownership. With the meaning of “home” expanding, will Gen Z buy sooner rather than later? Expectations are higher for Gen Z’s buyer potential than their millennial peers as they witnessed, but did not directly experience, the Great Recession. With those lessons in mind, they’re developing better money habits, like carrying less debt and prioritizing savings.
Here’s what you need to know about the new kids on the block.
The American Dream of homeownership is not lost on Gen Z: 91% indicate they have a strong desire for homeownership and plan to own a home someday, according to The State of Gen Z 2019-2020 report.
Gen Z has finances at the forefront of their minds. Unlike Millennials, Gen Z is less likely to view college debt as a necessity for their careers. Plus, the pandemic may be throwing a wrench in their plans based on CGK’s updated findings from July 2020, since over one-third are less likely to take on college debt due to uncertainties, and according to The National Association of Realtors®, nearly half of the buyers having difficulty saving for a down payment blame student loans. If Gen Z hesitates to borrow money, lower debt levels may create more opportunities for this next generation of buyers.
Overall, 45% of Gen Z members (50% for Gen Z men) think the pandemic will require them to live with their parents longer than they originally planned. At first blush, this appears contrary to encouraging potential buyers, but living with parents may yield a silver lining – savings. With fewer options for spending, savings for employed workers have increased across all generations, including Gen Z, where 59% believe they will save more.
Gen Z struggles to begin and gain footing in their careers. Remote work creates additional obstacles due to the unique nature of onboarding new employees, a different connection to coworkers, and fewer opportunities to develop relationships with mentors. Of Gen Z members surveyed between April 28 and May 4, just under half (45%) saw their hours decreased and 37% hadn’t found work. Slightly over one in four had filed for unemployment in the previous 30 days.
Lack of income puts a burden on older Gen Z’s (18-24), and over one-third are stressed about saving money. Before achieving savings goals, needs come first, and 46% have reached out to family or friends to borrow money. Even with help, as of July, 43% indicated they were behind on rent, credit cards or other bills.
As they’ve been hit the hardest, Gen Z isn’t optimistic about their future possibilities. One in three believe they will be worse off when the pandemic is over.
How to plan for their business
Although some have a dim outlook, many Gen Z people will persevere in this new climate due to the lessons ingrained in them from watching their parents’ repercussions from the Great Recession. But with 79% of Gen Z believing other generations do not understand them, how do you reach them?
Gen Z has strong trust in their family and friends. In any category, ranging from investing to entertainment, Gen Z ranks family or friends as their go-to source, especially when learning about new companies. Consider reaching out to clients, whether it be their friends, parents or grandparents that could sing your praises to the next generation.
A digital presence is a must with Gen Z and social media is the key to reach them. Beyond recommendations from family and friends, Gen Z also discovers new brands through YouTube ads – and one in four will seek out financial advice on YouTube. A YouTube channel could link you to potential customers who want to learn about one of the largest financial decisions they’ll make, the purchase of a home.
If a YouTube channel isn’t for you, consider your website. While one in four desires a clean/sleek looking website, you’ll meet one of the most important factors for 43% of Gen Z’s online if your website makes it “easy to find what I want.” Reviews also matter, and 62% believe good online ratings make them more confident in a brand.
Millennials are the focus of the real estate market now. Commonly, 25- to 34-year-olds are considered the prime homebuying cohort and millennials may not need to move over just yet. But with Gen Z crossing into that threshold, it’s important to engage early with this new set of buyers.
Erica Plemmons is an economist and Director of Housing Statistics
© 2020 Florida Realtors®