Generation Z, also known as the Digital Generation, consists of those born between 1997 and 2012. This generation is skeptical about taking the leap into first-time home ownership, and they are discouraged by the challenging feeling of figuring out how to buy their first home. In fact, the percentage of Gen Z that feel they will never be able to purchase a home on their own has increased from 27% in 2019 to over 33% of the generation’s population today.
Has the American Dream become a Pipe Dream? Are the roadblocks to home ownership real or perceived? Are they weighing all the long-term benefits of home ownership? Let’s take a look at this conundrum, including where we can be proactive from a marketing perspective to help this generation see the opportunity to embark on this rite of passage into adulthood.
Perceived obstacles Gen Z faces
Right now, the dream of home ownership is clouded by so many factors that the future seems dismal for this digital generation. Everything from crushing student loans to rising interest rates and job insecurity all play a role in this recoil from a first-time home purchase. According to the National Association of Realtors (NAR), the average age of first-time home buyers is now 36 years old, up from 33 years old just last year, adding even more time before Gen Z is in the average home buying years. According to a Freddie Mac survey in November of 2022, Gen Z adults identified the following as the top five hurdles to homeownership:
Another obstacle in the way of home-buying decisions for Gen Z is their anxiety about making large purchases. They remember what happened during the recession and the pain felt by so many families as they lost their jobs and homes. Although this is a lasting image, there is a silver lining to this recollection. While some were affected directly by the recession, they did learn from those whose parents were prepared for the downturn and were good financial stewards, capable of navigating through it. Keeping the hope alive that even though tough times might come again, there is a way to pass through them.
For Gen Z, who were in college or graduated during the COVID-19 pandemic, there is a prolonged period of living at home. The extension of living under their parent’s roofs delayed this significant milestone even further, making it more difficult to achieve. This had an impact on their readiness and timing to purchase their first home.
The competitiveness of home buying in the past 18 months has caused a lot of Gen Z to rethink their first-time purchase. High prices, all-cash offers, over-bidding, and “as-is/no inspection” purchases all played a role in the downturn of homebuying activity.
These roadblocks have real stopping power which led to the market responding in ways to help this generation, and others bridge the gap between first-time home buying and first-time home feeling. As a result, we are seeing an increase in build-to-rent options from developers, providing a gap fill between true ownership and the feeling of ownership. We also see first-time buyers investing in smaller, outer market homes, and keeping them for rental properties or second homes.
This perspective would not be complete without the recognition that technology has changed the home-buying game for Gen Z in a material way. This digital generation looks to technology first for solutions and options, which is no different when buying a home. The ability to search, identify, walk, and purchase a home without ever having set foot inside the door is here and Gen Z has embraced it. YouTube and other social platforms have demystified the home-buying process to a large degree. This includes step-by-step instructions available on our smartphones, with links to the tools to make it happen. Ironically, however, with all this technology at their disposal, one area of hands-on, in-person interaction which remains important includes the use of a realtor to help with the final execution of the purchase.
Of course, technology includes AI applications and other capabilities. We’ve highlighted a few AI tools here real estate marketers should all be aware of.
- Zillow 3D Home: Allows realtors to create virtual tours of properties using Ai-generated 3D models. This tool allows you to create a 3D model of the property and make it available for the clients to walk through the property virtually.
- Homie: An Ai-powered virtual home-buying assistant. This tool uses natural language processing and machine learning to communicate with buyers, answer their questions, and assist them through the home-buying process.
- Hyro: Conversational AI that provides an around-the-clock agent to step in whenever your agents can’t, capturing every lead from call centers, SMS and web-based inquiries.
For a more comprehensive dive into AI in Real Estate, check out this article from Maverick: Unlock the Power of AI Tools to Boost Real Estate Marketing.
It is clear, the market has met Gen Z where they are with a variety of options to help usher this digital generation calmly into first-time home ownership. Home builders will continue to include affordable housing in their portfolios, Zillow and Redfin are making it easy for Gen Z to browse homes from their couches, and we, as marketers, can help too. Here are a few strategies to consider when marketing real estate to Gen Z.
- Virtual tours
Educational and empathetic communication
- Trustworthy messaging
- Emotional aspects of homeownership
- Industry is cyclical
- First home isn’t forever home
In the end, Gen Z will continue to age, and as they do, we will be right alongside them to understand how they are feeling about their first-time home purchase to ensure we are prepared to intersect with them along their future buying journey. At Schaefer, our focus on the Real Estate development market means we stay up to the minute on not only the realities of the market but importantly the mindset of the home buyer. We understand how to best develop your brand, tell your story, and, most importantly, how, and where to intersect with homebuyers of all ages to drive action.