BAM Key Details: 

  • New Zillow research reveals over half of Gen Z and millennials who are not homeowners believe it would take winning the lottery for them to afford a home purchase. 
  • The down payment is a major barrier, with 36% of Gen Z saying they would sacrifice their beloved social media to magically have the funds to put down on a starter home. 
  • Both generations are still largely optimistic, with about two-thirds of Gen Z and Millennials saying it’s realistic for them to buy a home in the next five years. 

Over half of Gen Z and millennials believe that homeownership is a distant dream that can only be achieved by a stroke of luck. New Zillow research finds that 52% of Gen Z and 57% of millennials say it would take winning the lottery for them to afford a home purchase. 

Let’s put aside the odds for a sec. Because the key point here is that younger generations of home-buying age believe their path to homeownership will be fraught with challenges and may (or most likely will) require a stroke of luck. 

Barring a statistically unlikely windfall, 95% of Gen Z and 94% of millennials say that, in order to fulfill their dream of homeownership, they would have to make some more or less drastic life changes. Roughly 40% of millennials expect they would have to get a second—or third—job and 28% of Gen Z say they’d have to change careers to afford a home purchase right now.

These findings highlight the gap between Gen Z and millennials’ dream of owning a home and their ability to actually make it happen. Mortgage rates have been on the rise since last year, sending monthly housing costs through the roof — the typical monthly mortgage payment is now $431 higher than a year ago. Combine rising rates with record-breaking home value appreciation and it’s easy to understand why younger generations are wondering how they’ll ever be able to afford a home.

Amanda Pendleton

Zillow's home trends expert

The dreaded down payment

For many Gen Z and millennials, the down payment is a major obstacle to homeownership, with 36% of Gen Z saying they would sacrifice social media to magically have the amount of cash they would need to put down on a starter home. 

Many buyers—especially first-time buyers—aren’t aware that a 20% down payment, while widely recommended, isn’t usually required for a home purchase. 

That’s great news for cash-strapped home buyers doing the math and realizing they would otherwise have to save nearly $67,000 to buy a home valued at $334,944. In some markets, a 20% down payment can easily surpass six figures. 

Be sure you are educating home shoppers on their options for down payments, including any down payment assistance programs they may qualify for. 

Perceptions on what it will take to afford a home

Aside from winning the lottery, getting a second or third job, or changing careers, here are a few other things Gen Z and millennials say would be necessary for them to become homeowners:

  • 26% of Gen Z and 27% of Millennials say they’d have to give up all spending on clothing, dining, and entertainment
  • 20% of Gen Z and 25% of Millennials say they’d have to move to a different city
  • 26% of Gen Z and 16% of Millennials say they’d have to marry someone with (substantial) savings

That said, the cost of buying a home isn’t the only obstacle facing first-time buyers of any generation. Even with the growing list of resources for lower-income borrowers, the shortage of starter homes and the intense competition for livable homes at lower price points present real challenges for would-be home buyers—even those who can afford to put 20% down.

It’s especially difficult for those who don’t have the option of paying in all cash and whose bids can’t compete with those of investors. 

Just adding more buyers to the market won’t solve that. Real investments on the part of local, state, and federal governments to support the construction of affordable homes would make a more meaningful difference for these buyers.  

A few things you can suggest to help aspiring homeowners in your area

Notwithstanding the challenges facing home buyers in today’s market, there are some things you can recommend to your clients and to the aspiring homeowners in your community to get them closer to homeownership: 

  1. Get clear on what you can afford. Buyers need to know what goes into a mortgage payment and what they can comfortably afford to pay on a monthly basis. They can use a mortgage calculator to get a clearer sense of the monthly payment they can expect for a home they’re considering, given the price and current mortgage rates
  2. Narrow the search to those with monthly payments they can afford. Buyers can use the Zillow app’s new feature that allows them to filter search results by monthly payment. Zillow bases the calculation on current mortgage rates, which are updated frequently. 
  3. Get pre-approved for a mortgage. In competitive markets, sellers prefer buyers who are pre-approved (and not just pre-qualified) for a mortgage. Pre-approval does require a deeper assessment of a borrower’s finances, but it gives sellers more confidence in the buyer’s ability to finance the home they’re bidding on. 
  4. Shop around for a mortgage lender and start the pre-approval process. All mortgage lenders are not equivalent when it comes to providing the best options for each borrower. In this, you can help potential clients by steering them toward mortgage lenders you know to be both competent and trustworthy. 
  5. Get the help of a real estate agent who has their best interests at heart. Show them what you’re willing to do for them—above and beyond the “of course marketing” offered by the average agent—to help them find and purchase an affordable home they can see themselves in for the next 10+ years.  

Top takeaways for real estate agents

Despite some of the grim stats in this post, Gen Z and millennials are generally optimistic about becoming homeowners, with about two-thirds saying it’s realistic for them to become homeowners in the next five years. 

In the meantime, do what you can to educate prospective buyers in your market. Help them lay a strong foundation for homeownership when they’re ready to start searching.