Get Ready for Gen Z

By Michele Lerner

While most Realtors? work with millennials or baby boomers, the two largest generational cohorts active in the real estate market today, some are already encountering the next group of homebuyers: members of Generation Z.

“The Gen Z buyers I’ve worked with are energetic, excited and ready to buy,” said Judy Chin, a Realtor? with RE/MAX Villa Realtors? in Edgewater. “They understand the value of homeownership and think renting doesn’t make sense.”

That financial savviness may not seem surprising, but the oldest member of Gen Z, born between 1997 and 2012, is turning just 27 this year.

“I worked with one client who was 24 years old who decided to buy a multifamily building so the rent would supplement their income,” said Chin. “These young buyers don’t seem scared. They just want to get started and build equity.”

Given their young age, just 4% of homes were purchased by members of Gen Z in 2023, according to the National Association of Realtors? 2023 Home Buyers and Sellers Generational Trends report, with 30% of Gen Z moving directly from a family member’s home into homeownership.

They also buy the smallest homes, with a median size of 1,480 square feet, according to NAR, and are expected to remain in their newly purchased home for 19 years.

Characteristics Of Gen Z

Gen Z is the most diverse generation in the U.S. and, because of their use of social media, is also the most globally connected, according to Cognition Smart Data surveys from Green Builder Media. In addition, because they grew up experiencing two recessions and a pandemic, they tend to be more budget-conscious and focused on safety and security in their homes. More than 80% aspire to own a home, with 45% hoping to buy within five years

Unlike millennials, many of whom delayed homeownership, Gen Z is eager to start their homeownership journeys.

“Younger buyers aren’t that concerned about the size of the house and are happy with a small space as long as they have some kind of usable outdoor space and a place to work at home,” said Jennifer Romero DeFeis, broker/owner of RE/MAX Lifestyles in Hackensack. “I recently sold a one-bedroom, one-bathroom split level house with lots of windows and a little yard to Gen Z buyers. They were happy to find something nice and affordable even though it’s small.”

While they may need to compromise on their first home, Gen Z aspires to own an energy-efficient property with a home office, a peaceful area for meditation, and smart home features, according to Cognition survey data. Many in this generation recognize the long-term value of homeownership and the total operations cost, so they may be less focused on initial affordability.

While many members of this generation are in school and living at home with their parents, 38% are now in the workforce. Still, the biggest obstacle for this next generation is accumulating the funds for a down payment.

“Some of them get down payment and closing cost help from their parents, while others have parents who cover some costs such as the home inspection and appraisal,” said Simao Vassalo, a Realtor? with Coldwell Banker Realty in Sparta.

Affordability Issues For Gen Z

While plenty of Gen Z strives to become homeowners, many bump into a financial challenge, particularly in high-cost locations in New Jersey, said Vassalo.

“A few of them have trust accounts from their parents and grandparents, and others are successful in their careers at an early age,” said Vassalo. “But it’s more common to see these young buyers in parts of Pennsylvania where the cost of living is lower. Some of them will move there and commute farther to work so they can buy their first home.” Typically, these buyers finance their homes with 3% to 5% down, sometimes with a little gift from their parents, said Chin. “They’ve already run the numbers and are comfortable with a low down payment loan.”

Many members of Gen Z shop around for the best mortgage rates and programs, including grants for first-time buyers, said DeFeis.

“But they’re also willing to sacrifice to get into a house,” said DeFeis. “If they’re paying $3,000 a month for an apartment, plus the broker’s fee and security deposit, they realize buying is a better deal even if they have to buy something that doesn’t have the amenities their apartment has.”

Among the Gen Z buyers Vassalo has worked with, many are willing to take the risk of investing more in a property, even if it requires a new roof or siding, in order to afford buying a home.

“They’re willing to compromise and work with the sellers on inspection issues more than older buyers,” said Vassalo.

Educated, Yet Ready For Guidance

Chin, who has worked with multiple members of Gen Z for several years, said this generation does plenty of research before contacting a Realtor?

“But they know they don’t know everything, especially the nuances, so they rely on Realtors? to help them through each step,” said Chin.

This young generation needs extra guidance, said Vassalo. “They tend to rely on their parents, especially if they’re getting financial help, but they also ask a lot of questions and are willing to listen to advice from their agent.”

DeFeis finds it refreshing Gen Z knows what to expect from the market, primarily because of the information they get through social media.

“They often already know the difference between Federal Housing Administration loans and conventional financing because they’ve looked it up, but they really want to know the specifics about a neighborhood such as the nearest dog park and coffee shop, along with commuter information about buses and trains,” said DeFeis.

Next Generation Marketing

Social media is the main communication tool of Gen Z, according to Cognition Smart Data surveys, which found that 85% watch YouTube daily and 64% use Instagram daily. In addition, this generation prefers to handle as much as possible of the real estate transaction digitally through text or social media messaging.

“Once buyers find me on Instagram or Facebook, they often use direct messages even more than texting,” said Chin. “I have to tell them that I’m not always on Instagram to encourage them to text instead of messaging through the app. Sometimes I text them to let them know I need to call because there are too many details to discuss.”

The influence of social media is naturally pervasive within this generation. According to Coldwell Banker Real Estate’s 2024 Consumer Survey, 64% of consumers aged 18-24 report social media significantly influences their home preferences, compared to just 16% of people age 55 and older.

In addition, consumers in Gen Z said they’ve been most influenced by TikTok, 68%, in their decision to buy a home, compared to buyers aged 55 and older, who said Facebook, 54%, was bigger influence.

“Social media is the number one way to market to young buyers,” said DeFeis. “It doesn’t have to be that elaborate, either. Just a simple self-recorded video providing a few tips is all you need. I use live Instagram and live TikTok, especially if you partner with someone like a lender or a credit repair person to do a quick conversation.”

Still, most of the Gen Z buyers Vassalo works with found him at open houses or other events. “I’m young myself, so I think younger buyers gravitate to me,” said Vassalo.

No matter which generation you’re in, your local market knowledge and transaction insights will be needed by the next generation of buyers.