The oldest members of Generation Z are now at the right age to enter the real estate market and a good percentage are reportedly determined to be a homeowner, taking out mortgages instead of other types of debt. Although mortgage rates have become more affordable for Gen Z to purchase a home, finding the right one might be a challenge. It’s important for these young homebuyers to know that there are different types of homes available in the market to help them fulfill their American dream of homeownership.
- Condominiums – Often called “condos,” these types of homes are ideal for homebuyers who want to live in a shared community or a large building surrounded by Instagrammable amenities like swimming pools, gym, and lounge areas. Homebuyers who are eligible to take an FHA loan may find condos an affordable option as the agency recently updated its spot approval process.
- Single-Family or Single Detached Homes – Built on a single lot, this type of home is the most popular because of its unsurpassed privacy and the freedom to do anything within the lot. Yet many young homebuyers, especially those who are still building credit, may find this an expensive option. Aside from the monthly mortgage, single-family homeowners also have to shoulder costly home repairs and maintenance.
- Multi-family Homes – These are the types of homes that look like a single-family home that has two or more internal unit partitions. Owners of multi-family homes may live in one unit and rent out the other units.
- Townhouse or Townhomes – These are the types of homes that look like a single-family home but share a wall with an adjacent home or unit, just like condos. Some homebuyers prefer townhomes because it gives them some of the advantages of owning a single-family home and a condo unit.
- Co-op Homes – Cooperative homes or simply “co-ops” are buildings with units similar to condos, but with a different set up. Unlike condos, co-ops are more affordable, and everyone owns the building collectively.
Last August, Credit bureau Transunion reported that the number of Generation Z consumers with a mortgage in the second quarter of 2019 has increased by 112% or 319,000 borrowers compared from last year’s second quarter of 150,000 borrowers. As of the second quarter of this year, there are already 31.5 million Gen Z consumers who are eligible for a credit, and another 13 million are expected to add up to that number in the next three years.
The “Instagram Generation” prefer bigger homes with amenities
Another survey report suggests that Generation Zs are likely to pay more for a home down payment compared with Millennial homebuyers. Surveyed Gen Z respondents expect to pay a down payment of more than $50,000 as they prefer larger homes regardless of accessibility as long as it’s spacious with amenities.
Mortgage rates are falling but the home building is sluggish
The Mortgage Bankers Association said mortgage rates, specifically the 30-year fixed-rate mortgage, are plummeting. The overall U.S. economy is in good shape with a reduced unemployment rate, increased paychecks, and strong consumer spending. However, the prices of listed homes have increased, and home builders are falling behind to compensate for the demand. National Association of Realtors chief economist Lawrence Yun explained that construction workers shortage, costly materials, and slow housing permit issuance have greatly contributed to the sluggish construction of new homes.
Professional loan advisors can guide Gen Z homebuyers in their mortgage applications
Taking a mortgage is the most achievable and practical way to homeownership. However, to help you see beyond your preference, you may want to work with a realtor and one of our experienced Loan Advisors.