Experts indicate that no substantial changes are expected in the real estate market before 2025
Millennials and Generation Z faced serious difficulties entering the housing market in 2023, and projections for 2024 show no signs of improvement. Challenges such as accumulating a down payment, relatively high mortgage rates, and high home prices remain major obstacles, according to the consensus of housing industry experts. Despite the desire to own a home, the economic reality poses significant barriers for these generations.
Andrew Spieler, distinguished professor at Hofstra University’s Frank G. Zarb School of Business, told Fortune that market trends have not been favorable to young people for a long time, and he expects the housing market to not see major changes before 2025. “I think the tide has been against them for a long time,” Spieler said.
The specialist added that, although mortgage rates reached peaks of 8% in October and home prices have increased since January, sellers do not react immediately to these changes and may take time to adjust their prices.
The creative strategies have been embraced by prospective millennial and Gen Z buyers, who have taken on side jobs and included cash on their wedding gift lists to finance down payments on their homes.
Assuming a median home price of $350,000, $70,000 would be needed for the traditional 20 percent down payment. According to Amanda Pendleton, personal finance expert at Zillow Home Loans, and Nicole Bachaud, senior economist at Zillow, 60% of first-time buyers have used at least two sources to finance their down payment, including savings and gifts from family or friends.
Beatrice de Jong, a brokerage associate at The Beverly Hills Estates in Los Angeles, revealed to Fortune that almost all of her young clients receive financial help from their families to purchase a home, whether by contributing the down payment, co-signing loans, or assisting with monthly mortgage payments. Additionally, she noted that she has seen an increase in family participation in home buying like never before.
With mortgage rates expected to remain in the 6% range through 2024, millennials and Gen Z will need to continue looking for creative and realistic approaches to purchasing their first home, such as opting for condos given the high cost of homes with traditional characteristics of the suburbs according to De Jong.
“There is a lot more family involvement than I have seen before. “People are simply forced to be more realistic about what they can afford,” said the financial expert.