New research illuminates the millennial and Gen Z perspectives and homebuying behaviors influencing the market in 2022.
All eyes have been on millennials the past several years, as they have come of age (26-41) to buy homes and build families. They’ve become the dominant generation in home-buying activity, but there’s also good reason to look toward their younger counterparts. Gen Z adults (ages 18-25) are making it clear that they share the goal of homeownership with millennials. Many of them have already purchased homes, while others are taking steps toward achieving their goal.
Recent realtor.com research quantifies the momentum of Gen Z buyers, revealing that 72% of them say they’d like to buy a house in the future; 43% expect to do so within five years. Almost half, 45%, are saving for a house. This up-and-coming generation certainly deserves consideration as its influence on the housing market is poised to grow for years, even decades, to come.
Collectively, millennials and Gen Zers represented nearly half (44%) of all homebuyers in 2021, reports Zillow. This younger cohort of buyers, who grew up as the first true digital natives, exhibit homebuying habits and preferences that set them apart from older generations and set the stage for the future.
The ServiceLink 2022 State of Homebuying Report (SOHBR) brings these perspectives and behaviors to light through data collected by surveying 1,000 homeowners (48% in the millennial/Gen Z age demographic) who purchased a home within the past five years. Research findings, including the following highlights, offer a look into the potential of these young buyers.
Millennial and Gen Z homebuyers are ready to act in 2022
The youngest subset of buyers will account for much of the housing market activity this year, whether buying their first or a subsequent home, or refinancing. It’s especially notable that many of the millennials and Gen Zers who responded to the ServiceLink survey — individuals who had purchased a home within five years — plan to buy again in 2022. Even more expect to refinance.
Specifically, nearly a third (32%) of these younger homeowners said they plan to refinance this year; that compares with 23% of Gen Xers (ages 42-57) and 9% of baby boomers (ages 58-76). More than a quarter (26%) of Gen Z/millennial homeowners said they are likely to buy a new home in 2022, compared with 12% of Gen Xers and 6% of baby boomers. They’re not letting logistics slow them down either: 23% said they would buy a house without seeing it in person first. That compares with 16% of Gen Xers and just 5% of baby boomers.
Younger generations are motivated by the prospect of additional space and investment opportunities
Whether they are looking to create a larger workspace, have more room to raise their children or just enjoy more wide-open spaces, millennial and Gen Z homeowners continue to look for opportunities to grow.
Forty-two percent said they had bought their current home to upsize, and 17% said they had needed more space for remote working. As might be expected, fewer Gen X and boomer respondents said the same. Younger generations have their sights set on upsizing while older generations are more likely to be downsizing.
Younger buyers are more likely to purchase a home as an investment property, too, with 14% saying they had bought a home as a fix-and-flip or rental property; that compares with 7% of Gen X buyers and 3% of baby boomers.
Sky-high home prices discouraged some from buying in 2021
While many millennial and Gen Z homebuyers were undeterred by record-high home prices in 2021 — in fact, millennial demand was a consequential driver of higher home values in neighborhoods with kids, according to a Zillow analysis — a third of those who considered buying decided against it, due to financial considerations. Forty-one percent cited the high cost of home options directly; another 32% said they didn’t buy because their financial situation had changed and 28% said the down payment requirement was too high.
It’s interesting to note; however, that an even larger percentage of millennial and Gen Z buyers considered but didn’t go through with a home purchase in 2020 (50%, compared with 33% in this year’s study), according to the 2021 State of Homebuying Report. Perhaps this is an indicator of economic optimism, signaling that younger buyers’ attitudes and means are coming into closer alignment with evolving housing market conditions.
Auction and other alternative options hold appeal
Resourcefulness is a defining characteristic of the youngest generations of homebuyers. As the housing market became intensely competitive and increasingly expensive last year, they got creative by considering alternative options to traditional home buying, such as buying with friends or family, buying a fixer-upper and buying at auction. According to the SOHBR, buyers under 41 are the most likely to consider buying an auction property: 55% have either already done so or are open to the idea, compared with 50% of Gen X and 23% of baby boomer homeowners.
A separate ServiceLink study revealed that 55% of millennials (42% of consumers overall) are motivated to consider buying at auction by having the option to bid online. Digital natives are open to using remote bidding tools because they eliminate the need to travel to auction properties to participate.
Technology is important but not their only trusted resource
When it comes to the homebuying process itself, younger buyers enthusiastically embrace technology. One in four millennial/Gen Z buyers chose an online/digital lender for their most recent home purchase, compared with about one in five Gen X buyers and one in 20 boomers.
Overall, 73% of younger buyers researched property listings online, 38% took virtual tours of property listings and 35% eSigned their mortgage documents. (The significant increase in eSignings among this group — up 24 percentage points from the 2021 SOHBR results — could signal that young homebuyers are warming to self-service options they may not have considered before the pandemic influenced attitudes about face-to-face meetings.) Asked about the benefits of using digital tools, they most often cited convenience/ease of use (66%), time savings (60%) and flexibility to make progress on their own schedule (53%).
It looks as though this group wouldn’t mind a little more technology in the process, either. When asked what improvements they would like to see to the homebuying process, 40% said less paperwork, 29% said more transparency around fees and 28% said not having to provide the same documentation multiple times. The right technology could help lenders enhance their processes in each of these areas.
Of course, even the most tech-savvy buyers sometimes need additional support, especially early in the homebuying process. Millennials and Gen Z buyers said they turned to their real estate agent (59%) and/or family and friends (57%) when they needed advice.
The future belongs to young, engaged buyers
As millennials continue to espouse homeownership and Gen Zers come into their own as the next generation of homebuyers, the influence of these younger consumers on the real estate industry will grow even stronger. Understanding and accommodating their needs and preferences will help ensure continuing momentum.
Miriam Moore is the president of default services for ServiceLink, a national provider of transaction services to the mortgage and finance industries.
