Younger generations are ready to make a move in their home buying journey this year, according to the latest ServiceLink State of Homebuying Report. With 63% of Gen Z respondents and 59% of millennial respondents saying they plan to purchase a home in 2024, compared with 45% of Gen X and 21% of baby boomers, the younger generations are feeling more optimistic about the market.
While 47% of all respondents who purchased a home or tried to over the past four years plan to buy this year, it is renters (69%) and those living rent-free (70%) who are the most eager compared with the 34% who currently own.
Over half of Gen Z and millennial respondents agree that conditions for buying are favorable compared with Gen X (38%) and baby boomers (18%). Yet, 33% of Gen Zers report earning less than $50,000 and 22% earning more than $100,000.
“This is an interesting and pivotal moment in the housing and mortgage industries as the younger generations are not only determined to buy but are seemingly undeterred by the higher price tags and interest rates,” says Dave Steinmetz, president of origination services, ServiceLink. “Our study suggests that Gen Z and millennials are poised to impact the market in several ways, including purchase, refi, and home equity, which is an opportunity for lenders to educate and usher these younger buyers through the process.”
Despite typically having lower incomes, Gen Z and millennials are more willing to pay higher future interest rates than older groups. Gen Z homeowner respondents, with an average current interest rate of 5.4%, would consider going as high as 6.3% in 2024, while millennials, with a current interest rate of 5.2%, would consider 6.2%. In contrast, Gen X, with a current interest rate of 5%, would consider 5.8%; and baby boomers, with a current interest rate of 4.6%, would consider 5%.
Of homeowners, those who purchased in 2023 are more likely to accept a higher future mortgage rate than those who purchased in 2020. The report found that respondents who purchased a home in 2023 (with an average rate of 6.3%), would go as high as 6.4% in future mortgage rates, and respondents who purchased a home in 2020, who have an average 4.8% mortgage rate, would consider a 5.5% mortgage rate at highest.
Many homeowners are looking to reduce their current rate, with 27% of all respondents saying they would consider refinancing to get a better rate. Additionally, 22% would refinance to make home improvements, and 16% would refinance to pay down debt.
Up from 21% in 2023, 34% of respondents report having more than $100,000 in home equity, and, of that share, 19% say they have more than $200,000 in equity. Only 28% of respondents plan to take out a home equity loan this year, and, of those, 48% plan to cash in their equity for home improvements and 23% aim to pay off other debt.
For 2024, 79% of respondents who unsuccessfully tried to buy a home over the last four years say they plan to try again this year. Last year, 40% of respondents say they decided against purchasing because mortgage rates and prices were too high, while 33% say their financial situation changed.
This story appeared on Builder Online
