This article was written by The Zillennial Zine’s spring editorial intern Ian Ferdock. Find him on Instagram at @ianferdock. If you would like to share an article with The Zillennial, send us an email at thezillennialzine@gmail.com.
An economic rite of passage for every generation of Americans has been the ability to purchase a home. It is a central cornerstone of the American Dream. Buying a home is an important avenue toward long-term financial security. However, the stark reality is that buying a home and moving out has become increasingly difficult. This is especially true for younger Americans, like Zillennials. First-time homebuyers find themselves increasingly pushed out of a market with a seemingly endless upward trajectory. With a lessening inventory, higher prices, and even higher interest rates, Zillennials may wonder if they will ever catch a break. Many are asking, will houses ever be affordable again?
As my girlfriend and I have begun to plan our lives together, a major goal we have set for ourselves is to purchase a home. Neither of us likes the idea of renting or living in an apartment. While those accommodations may work for others, we have pets and would prefer to have more space and stability which is best offered through homeownership.
The issue we are facing is an uphill battle. Right now, the job market is tough, and the housing market is even more fraught with obstacles. We both have struggled to get our careers started after college and that makes saving money tough. Luckily, we have had a lot of support from our parents and still live at home. This has allowed us to start saving, but when we look 5 to 10 years down the road, we are still unsure if we will be able to afford a home.
To complicate matters, we also live in one of the most expensive regions in the country. The Washington D.C. area has a high cost of living, that is hard for young adults to keep up with. Home values on our street alone are a minimum of $1 million. We know that our first home will be further from the city and in the suburbs. However, we still ask ourselves, will houses ever be affordable again?
The State of Affordability
A recent study conducted by the Pew Research Center helps to break down the state of affordability in the American housing market. Overall, Americans are growing increasingly concerned with the cost of living. A major component of that cost is of course housing. Nearly three-quarters of Americans have grown “very concerned” about the cost of homes. Zillennials aren’t the only ones feeling this squeeze either. A common metric used to determine the affordability of housing is that its associated costs should not exceed 30 percent of a family unit’s household income. If housing costs do breach that benchmark, Americans are considered “cost-burdened”. According to the U.S. Department of Housing and Urban Development, almost one third of Americans find themselves in that exact situation.
Low Inventory
According to expert local realtor Darren Robertson, Americans are feeling this economic squeeze primarily from a significant increase in home values in the wake of the COVID-19 pandemic. In September 2019, 1.2 million homes were listed for sale each day on average. By September 2023 that figure had dropped by over 40 percent. In September of last year, there was a 30 percent increase in homes listed for sale, but the market has not yet rebounded to pre-pandemic levels.
High Prices
With an inventory that is struggling to keep up with demand, costs are driven higher. From July 2019 to July 2024, the average selling price of single-family homes increased by 58.7 percent. Even though everything seems to have gotten more expensive, the Consumer Price Index only rose 22.8 percent during that period which indicates that home prices are increasing more rapidly than most consumer goods and services. This has led many prospective homeowners to explore cost-saving alternatives like solar battery storage systems that store excess energy generated by solar panels for later use, potentially reducing long-term utility expenses.
Construction Can’t Keep Up
Further exacerbating the issue is a lack of new construction. The home building industry took a massive hit during the 2008 Great Recession, from which it has not wholly recovered. This aspect of the problem affects prospective Zillennial homeowners especially hard. Fewer new homes are being built, which stresses already low inventory. This is then compounded by a smaller proportion of new homes being affordable starter homes. Entry-level single-family homes are defined as less than 1,400 square feet. Homes of that size composed 12.1 percent of newly built homes in 2004. By 2023, that number had fallen to a mere 8.7 percent. When all these factors combine with high interest rates, it’s not difficult to see why young adults feel priced out of the market.
2025 Housing Market Outlook: Will Houses Ever be Affordable Again?
Now that we have laid out the grim reality of the US housing market, it’s time to answer the most important question. Will houses ever be affordable again? Well, probably not. At least not in the immediate future. JP Morgan predicts that the housing market in 2025 will see mostly sideways action. That means there won’t be a ton of changes. Their analysis foresees a moderate 3 percent growth in the housing market, which should keep prices within their current range. Furthermore, interest rates are unlikely to come down much, hovering around 6.7 percent which is in line with most of 2024.
The current prices and rates have lessened demand for homes as most Americans are still struggling to keep up with the overall cost of living. Furthermore, higher rates also tend to hinder the construction of new homes. While that is not an ideal situation, for Zillennials hoping to purchase their first home the challenges aren’t expected to get more difficult. Housing inventory has risen slightly, which could be from lessening demand. However, inventory is still below historical averages which certainly isn’t aiding the situation.
Another big question surrounding the housing market is how a second Trump presidency may affect affordability. There hasn’t been much released regarding whether his administration will do much to combat the lack of affordable housing. Trump has claimed that immigration is to blame for many of the issues surrounding affordability. However, if immigration is cut the most likely consequence will be a labor deficit in the construction industry resulting in fewer homes being built, driving prices higher. His overall economic policy goals, especially the utilization of tariffs, are most likely going to increase inflation which will further increase prices.
The Silver Lining for Zillennials
While I’m sure this news is a bit depressing, there are a few reasons for Zillennials to have some hope. An interesting, and for me rather surprising piece was published by CNBC regarding the homeownership rates of Gen Z. Even though market conditions are tough, Gen Z is outpacing Millennials and Gen X in their rate of homeownership. Despite grappling with below-average incomes than their generational predecessors, many members of Gen Z are doing exceedingly well. As of 2023, 27.8 percent of Gen Z that are 24 years old own a home. In comparison, when Millennials and Gen X were 24 years old 24.5 and 23.5 percent of them owned homes respectively.
A Head Start From COVID
The most likely reason for this phenomenon is that Gen Z benefitted from a head start provided by the unique economic conditions during the COVID-19 pandemic. In 2020 and 2021 interest rates hit record lows and prices had not yet exploded as they have in recent years. Plus, the widespread adoption of remote work made it easier to earn a higher salary while living in a less expensive region of the country. This offered many members of Gen Z a perfect window to get into the housing market.
As market conditions have become more unfavorable, Gen Z homeownership does seem to have plateaued in 2023 and 2024. Despite these ongoing challenges, an overwhelming majority of Gen Z aims to purchase a home within the next 6 years. There’s no need to understate reality, this will be difficult Gen Z and Millennials to achieve. In 2020 Americans needed to make on average $41,465 to qualify for a mortgage on an entry-level home and in 2024 that has nearly doubled to $75,849.
There is still some good news though. Research has indicated that Gen Z is more financially literate than previous generations and they have an increased inclination to plan for their futures. Furthermore, Gen Z is luckily getting a great deal of support from their parents. Everyone’s situation is different, but almost one-third of Gen Z adults still live at home, allowing them to cut costs and save for down payments. Additionally, 78 percent of Gen Z home buyers received financial assistance from friends or family when entering the housing market.
Be Patient
It’s hard to be optimistic for many young Americans, especially Zillennials. Economic conditions have hindered upward mobility and left many of us feeling left behind. Nonetheless, it is still important to have some hope. I know it’s hard to look on the bright side when opportunities look rather bleak, but what other choice do we have?
Markets are always changing, and even though over the long term the real estate market generally always goes up, conditions are never static and can always change. Interest rates eventually will come down producing a better environment for Zillennial homebuyers. In the meantime, it’s time to save and plan for the future.
Trust me, I know it sucks. I’m tired of asking, will houses ever be affordable again? When you want to be financially stable and independent, and you can’t get where you want to be it’s frustrating. The important thing to remember is that every person, let alone every generation, has their own unique set of challenges. Nobody’s life is on the same trajectory so just take things one step at a time.
Please share with us in the comments below if your goal is to buy a home, and what your strategy is to get into the housing market.
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