It’s not easy to buy a single-family home today. But for Gen Z – those between the ages of 18 and 27 as of 2024 – especially those with limited income and a smaller savings pool, it may not get any easier in the future.

According to a report released in late October from InMyArea.com, Gen Z members who own homes have worked hard to get them, using tactics like second jobs, moving to more affordable areas and purchase of foreclosed homes.

If you’ve seen the real estate market lately, it’s no wonder that it’s difficult for Gen Zers to buy a home. In addition to high house prices, mortgage interest rates remain high, reaching an average of 6.88% for a 30-year fixed-rate mortgage on October 29according to Zillow data provided to Investopedia. That’s almost 1 full percentage point more than 5.89% average we saw in September before the Fed meeting.

If you’re a Gen Zer hoping to buy a home, should you buy now or wait for interest rates to drop? That depends on your reasons for wanting a home, the strength of your finances and credit, and your belief that mortgage rates will fall in 2025.

The average US home costs $359,892, but the average annual income is only $60,580

The median home price in the US is $359,892, up 2.7% year-over-year in September 2024, according to Zillow. And the average weekly earnings of the 120.8 million full-time wage workers in the U.S. were $1,165 in the third quarter of 2024, according to the U.S. Bureau of Labor Statistics (BLS). Multiplied by 52 weeks, that works out to an average annual salary of about $60,580.

With that annual salary, it’s not easy to buy an average house. After a 20% down payment, the monthly principal and interest payment on a 30-year home loan at 6.88% would be $1,892. If you only make $5,048 a month (before taxes and any deductions), that mortgage is eating up a good chunk of your money. For younger adults who are part of Generation Z, buying a home is even more of a challenge because their average salaries may be even lower as they begin their careers.

Workers ages 16 to 24 earned an average weekly wage of $746 in the third quarter of 2024 — about $38,792 a year, according to the BLS. Even the oldest Gen Zers (ages 25 to 27) don’t earn the median US wage — they only earn an average of $57,564 per year.

Despite lower-than-average salaries, about 25 percent of Gen Z adults own homes, according to the InMyArea.com study. How did they reach this milestone?

About a third of Gen Zers in the study said they worked multiple jobs to afford a home, while 22 percent moved to a more affordable area.

This last strategy makes sense. Buyers can save a significant amount of money if they move to a new state. Zillow reported that the median home value in New Jersey was $535,982 in September. But in West Virginia, the median home value is much lower: $167,571. Gen Zers expanding their search from a more expensive housing market like New Jersey to a more affordable one like West Virginia can stretch their homebuying dollars.

The study also found that 18% of Gen Z buyers received money from family members, 15% purchased a fixer-upper to reduce their upfront costs, and 11% purchased property from a friend or family member. the family. A further 7% said they had bought a foreclosed property – a higher rate than any other age group – while 8% had received a government grant or worked with a first-time home buyer assistance programme. date.

Despite financial barriers to home ownership, 87% of Gen Zers told InMyArea.com they agree that home ownership is part of the American dream.

The study also found that young adults are eager to buy. A total of 32% of respondents aged 18-27 who do not yet own a home said they plan to buy one in the next five years, while 38% said they plan to buy five years from now before. Only 30% said they did not plan to buy or were not sure when they would buy a home.

Buy now or wait?

So if you’re a member of Gen Z, should you buy a home today or does it make more sense to wait for mortgage interest rates to drop?

Darren Tooley, a senior loan officer at Cornerstone Financial in Southfield, Mich., said waiting for rates to drop could pay off for young homebuyers.

The challenge? No one can predict exactly what mortgage interest rates will do. This means young buyers could be waiting a long time for rates to drop.

“It is widely forecast that in the fourth quarter of this year and next year, mortgage rates will decline,” Tooley said. “And I think they will. But rates never rise or fall in a straight line. There could be days. or weeks or months when rates are rising even in a falling rate market.”

But what if you want to buy a house now? Maybe your family is growing and you need more space. Maybe you’ve been transferred to a new city for your job and want to put down roots. Is it a bad decision to buy a home today when interest rates are higher?

According to Tooley, it is not. The right time to buy a home is when it makes sense for you, regardless of the interest rate.

“I’m a firm believer that it’s always a great time to buy a home,” Tooley said. “When you look at what home values ​​have done over the years, buying a home is one of the best and safest investments a person can make.”

In addition, you can always apply to refinance your mortgage to lower your monthly payments and pay less interest over the life of the loan.

How we track mortgage rates

The national and state averages mentioned above are provided as-is via the Zillow Mortgage API, assuming a loan-to-value ratio (LTV). of 80% (ie, a down payment of at least 20%) and an applicant credit score in the range of 680–739. The resulting rates represent what borrowers should expect when they receive quotes from lenders based on their qualifications, which may vary from advertised teaser rates. © Zillow, Inc., 2024. Use is subject to the Zillow Terms of Use.