Millennials, Gen Z Make More Sacrifices to Become Homeowners
Zillow, Seattle, said younger buyers are more likely to make serious financial tradeoffs to buy a home, such as skipping healthcare services or cutting back on insurance.
The Zillow Group Consumer Housing Trends Report found a majority of home buyers (55%) make some sort of financial sacrifice, such as cutting their entertainment budget or reducing their savings, in order to buy a home.
Furthermore, the survey reported Millennial and Generation Z home buyers tend to give up the most to buy a home, with 71% making at least one financial tradeoff to fund their home purchase. Meanwhile, 57% of Generation X home buyers and 33% of Baby Boomer or Silent Generation buyers say they made a financial sacrifice to buy a home.
As to those sacrifices, the survey said for the most part, buyers take on more work and less play to fit a home purchase into their budget. Cutting back on entertainment spending is the most common sacrifice home buyers make, followed by working more hours or picking up a second job and postponing or canceling vacation plans.
However, the survey reported some buyers–particularly younger ones–make more serious tradeoffs. For example, 13% of millennial and Gen Z home buyers skipped healthcare services, compared to 8% of Gen X buyers and 3% of older buyers. Younger buyers are also more likely to reduce or cancel some type of insurance coverage to save money for a home purchase.
“The fact that homebuyers have to make tradeoffs to save for the down payment is not surprising,” said Kathryn Coursolle, economist with Zillow. “That’s pretty much the study of economics: how people make decisions when they can’t have everything. But today’s tradeoffs are non-trivial and often cut into more than just the ‘nice-to-haves.’ Indeed, some of those who manage to buy young are foregoing going to the doctor or paying for insurance. To buy young means sacrificing more, ostensibly for the ability to sacrifice less, later.”
The survey noted coming up with a down payment is a frequent obstacle for homebuyers and, as home values rise, saving for a down payment takes longer than it used to. Most home buyers also carry some type of debt, which can make it harder for them to buy a home without making other financial adjustments.
Nearly one-third (29%) of younger buyers go over budget on their home purchase, compared to 23% of Gen X buyers and 22% of Baby Boomers, the survey said. “Of those who do go over budget, one-third (33%) say they did so because they fell in love with a home above their price point, while others bought a home in better condition or in a more expensive neighborhood than planned.
However, while millennials and Gen Z are more likely to make financial sacrifices to get their home, they’re also more likely to receive help from others. Nearly half (47%) of younger buyers with mortgages received a gift or loan from family or friends for part of their down payment, compared to 33% of Gen X buyers and 13% of older buyers.
