Why Builders Should Keep Their Eyes on Generation Z

It seems like we just wrapped our heads around Millennials entering the market, but the next generation of homebuyers will come faster than you think. That’s right: the eldest of Generation Z, most famous for starting the Tide Pod trend and using TikTok, are already dipping their toes into homeownership. They only make up roughly 3 percent of the market right now and are mainly focused on finding inexpensive houses. But this generation is the future of homebuying, and as digital natives, they will change how the home industry operates once again, as Millennials and Boomers did before them. This time, however, experts say everything will be going online—even financing.

Millennials are now the largest group of U.S. home buyers — 37% of all buyers in 2018, per the National Association of Realtors. But many millennials still rely on the “Bank of Mom and Dad” to get a home, because they can’t afford the down payment. Millennials make an average down payment of about 8% of the purchase price, which is considerably less than baby boomers who put down around 20%.

While millennials will still comprise the largest group of home buyers for the foreseeable future, another cohort is closer on the horizon: Generation Z.

These are people born between 1995 and 2010, and the oldest of them are starting to buy houses. Gen Z represented 2.4% of the home-buying customers of my firm Caliber Home Loans in 2019, up from about 1% in 2018. What’s more, Gen Z made up almost 2% of our volume. They are a considerably smaller amount of our refinancing customers (under 1%) likely because those who have already bought a home haven’t owned one for long enough to take advantage of falling interest rates.

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