Gen Z’s Housing Crisis: Why Even Six-Figure Earners Can’t Afford Starter Homes
The American dream of owning a home has long been a fundamental goal for many generations. However, for the younger generation, this dream has become increasingly unattainable due to the rising housing cost and stagnant wages. Gen Z, those born between the mid-1990s and mid-2010s, are facing a housing crisis that is proving to be a major hurdle in achieving their American dream. Even with substantial incomes, many Gen Zers are struggling to afford even starter homes. In this article, we will explore the reasons behind this housing crisis and its impact on Gen Z’s financial future.
The Rising Cost of Homeownership
According to a recent study by Zillow, the median home value in the United States has risen by nearly 40% since 2012, reaching a record high of $266,104 in June 2020. The increasing housing prices have made it difficult for many to afford a home, especially for younger generations who are just starting their careers and may not have substantial savings. This has resulted in a significant shift towards renting rather than owning a home among Gen Zers.
The Impact of Student Debt
One of the main reasons why Gen Zers are unable to afford homes is the burden of student debt. The average amount of student debt for a Gen Z graduate is around $37,584, making it challenging to save for a down payment on a home. With high monthly student loan payments, it becomes challenging to save and invest in other financial goals, including homeownership. This also impacts their credit score and makes it challenging to secure a mortgage.
The Overcrowded Rental Market
The increasing demand for rental properties has resulted in a crowded rental market, driving up rent prices. According to a report by Apartment List, the national median rent in 2019 was $1,463, which is nearly 10% higher than five years ago. As a result, Gen Zers are forced to spend a significant portion of their income on rent, leaving little room for saving for a down payment on a house. This further perpetuates the cycle of struggling to afford a home.
Stagnant Wages
The rising cost of living and stagnant wages make it challenging for Gen Zers to save for a down payment on a home. Despite having higher levels of education, Gen Zers are facing lower wages than previous generations. According to a study by Young Invincibles, the median salary for a college-educated 22-year-old in 2013 was $41,000, compared to a median salary of $25,500 for the same age and education level in 2016. This wage stagnation makes it difficult to save for a down payment on a home, making homeownership an unattainable dream for many.
The Impact on Gen Z’s Financial Future
The inability to afford a starter home can have a significant impact on Gen Z’s financial future. Homeownership is often seen as a way to build wealth, but without access to this asset, Gen Zers may struggle to accumulate wealth and achieve financial stability. Additionally, renting rather than owning a home often means paying someone else’s mortgage instead of building equity in their own property. This leaves Gen Zers at a disadvantage when it comes to creating long-term financial security and stability.
The Importance of Addressing the Housing Crisis
In order to ensure a brighter future for Gen Z, it is essential to address the housing crisis and make homeownership more attainable for this generation. This may include implementing policies to combat rising housing costs, providing financial aid to those with student loan debt, and increasing wages to keep up with the cost of living. Additionally, there is a need for more affordable housing options, such as co-living spaces or micro-apartments, to cater to the needs of this generation.
The Role of Education in Financial Planning
Finally, it is crucial to educate Gen Zers on financial planning and the long-term benefits of homeownership. With proper knowledge and financial planning, they can make informed decisions and set realistic and achievable goals for themselves. This includes understanding the importance of managing debt, building credit, and saving for a down payment to achieve their dream of owning a home.
In conclusion, the housing crisis is a major hurdle for Gen Z, despite their higher levels of education and substantial incomes. The rising cost of homeownership, student loan debt, and stagnant wages are just some of the factors that make it challenging to become a homeowner for this generation. Addressing this crisis and educating Gen Z on financial planning are essential steps towards creating a brighter financial future for this generation.
