Generation Z, born between 1997 and 2012, faced pandemic disruptions and shutdowns, inflation that reached a 40-year high, and interest rates that hit record lows. 2007 levels in recent years – with less time than their predecessors to build up resources to ride. out of the storms.
Many Zoomers feel that having children or buying a home is out of reach given rising daily expenses, the brutal cost of child care, and the painful combination of near-record house prices and interest rates. much higher mortgages. Stocks are also trading near record highs, depressing long-term returns for new investors.
But things may not be as bad for Gen Z as they seem. A recent Federal Reserve working paper found that in the United States, the average man aged 25 earns a real household income of more than $40,000 after taxes and government transfers. That’s a higher average sum than any of the last six generations earned at this age.
Additionally, a Redfin study from last year found that 30% of 25-year-olds own their homes in 2022, compared to 28% of millennials and 27% of Gen Xers at that age. Baby boomers came in first with 32% participation.
Gen Zers are expected to spend more on housing costs like rent, mortgage, insurance and utilities after inflation between ages 22 and 30 than millennials, according to a recent analysis from RentCafe.
Yet Gen Z’s generally higher income means they’ll only spend about 30% of their income on housing, compared to 36% for millennials.
It’s a similar story if you include college loans. On average, those under 25 spent 43% of their after-tax income on housing and education (including interest on student debt) in 2022 – less than those under 25 paid between 1989 and 2019, according to The Economist.
Success may be short-lived
It’s worth asking why Gen Z is doing well financially. They may be better educated and qualified than previous generations. They have also benefited from above-average wage growth and high employment levels in recent years, partly reflecting labor shortages caused by the pandemic, wage increases and bonuses offered by desperate employers and an overall historically low unemployment rate.
Stimulus payments, temporary and permanent student loan payment relief, and saving on rent by living with family during lockdowns also helped the generation amass cash for down payments and other expenses.
This latest trend continued with the Fed study revealing that more than 30% of 24-year-old Gen Zers live at home with their parents or their spouse’s parents, compared to about 15% of babies. boomers at this age.
Gen Z’s relatively high homeownership rate may also be less impressive than it seems. Younger people tend to buy smaller, less expensive homes because they are generally more flexible about how many rooms they need and where they live if they don’t have children or parents. shift.
The rock-bottom mortgage rates before 2022 undoubtedly helped too, and now that they have risen sharply, it will be much harder for younger members of the cohort to afford their own homes.
businessinsider
