What Do Home Builders Need to Know About Gen Z Buyers?October 13, 2016
Sixteen-year-old Cynthia Cannon is still working on getting into college, but she’s already thinking about buying a home someday. She’s even started setting money aside.
“I’d like to buy a house in the suburbs and raise my kids there,” she says.
She’s not alone. In fact, her views on home ownership reflect the majority of Generation Z, or those born in the mid-1990s to mid-2000s. Comprising more than 60 million Americans, Gen Z outnumbers millennials by nearly a million, accounting for more than a quarter of the U.S. population—more than any other generation. And in the next 10 years or so, millions of them plan on buying homes.
“Gen Z is the tsunami behind the millennial wave,” says global marketing expert Jamie Gutfreund. With billions of dollars in spending power already, they’re poised to become a key market for home builders in the near future.
Unlike their millennial older siblings, who all but abandoned the dream of home ownership in favor of renting, Gen Z “seems to prize home ownership like no generation since their great-grandparents,” says Time Magazine. Four in five teens rank owning a home as the most important factor in achieving the American Dream, while 97 percent see home ownership in their future.
And it’s not a dream they take lightly. They’re willing to make sacrifices for it, including their beloved technology. More than half say they would be willing to give up social media for a year (or even double their nightly homework) if it would secure them their ideal home. Considered one of the most entrepreneurial generations, 77 percent would still choose owning a home over owning a business.
That’s a stark contrast to their elders. Just 65 percent of Americans own a home, while four in five are reconsidering their reasons for wanting to buy one. But growing up in the shadow of the Great Recession and watching their older siblings boomerang back into the family nest has instilled post-millennials with a longing for the security home ownership represents. Most aim to own a home by age 28—three years earlier than the median age of first-time homeowners.
“Many of these Gen Z teens were 7 to 11 years old when the recession hit,” says Sherry Chris, CEO of Better Homes and Gardens. “At that age, children equate home with stability.”
If recent housing shortages are any indication, builders will soon have their hands full keeping up with the demand for new homes as this potent generation begins flooding into the real estate market. Understanding how post-millennials think is the key to capturing these future home buyers. Here are seven things home builders need to know to get ready for Generation Z:
- They’re pragmatic.
Coming of age in a time of global conflict and economic turmoil has deeply influenced this generation’s outlook. “I think I can speak for my generation when I say that our optimism has long ago been replaced with pragmatism,” says 17-year-old Seimi Park.
Three in five teens have already begun saving for the future and recent college graduates are emerging with just half the credit card debt of millennials. RISMedia has named them “realists who possess a deep understanding of today’s social and economic issues.”
These cautious spenders will want homes they can easily afford. They expect to pay, on average, $274,323 for their first home—which is right in line with today’s median home cost of $273,500.
- They value suburban life.
Unlike millennials, 62 percent of whom have declared a preference for mixed-use urban communities, Gen Z already has its sights set on the suburbs.
Many teens like Cannon see themselves spending their twenties in the city, building careers and enjoying social opportunities, before settling in the suburbs to have children. Nearly half envision buying a home located in a suburban neighborhood, while just 23 percent plan to stay in the city for the long term.
- Square footage isn’t everything.
Spacious luxury homes are unlikely to factor into Gen Z’s version of the American Dream. The first truly global generation, Gen Z will be looking to buy modest, functional houses that “will allow them to live their best lives, but to be within their means to allow for financial freedoms to travel the world,” Gutfreund says.
Many come from large, multi-generational households—encompassing grandparents as well as boomerang older siblings—so they’re used to sharing space. When it comes to prioritizing square footage versus amenities, they’re split down the middle.
As teenager Cannon puts it: “I don’t need a big house, as the people in a home are the most important aspect of it. Anyway, location is everything, right? If you live in an awesome house, but it’s in a bad area and you can’t get to anything, what’s the point?”
- They’re likely to stay put.
Speaking of location, although only 17 percent of post-millennials intend to settle in their hometown, most do want to stay relatively close to where they grew up.
Nearly four in 10 would like to live within the same region (such the Northwest or Southeast), and more than a third see themselves remaining in the same state. In any case, they’ll be looking for homes they can settle into for a while; on average, they plan on owning just two homes during their lifetime.
- They crave security.
Growing up in uncertain times has shaped Gen Z’s outlook immensely, says Forbes. Security is important to these future home buyers, which means that offering the right home warranty solutions could be a key to unlocking this market.
Many will be lured to newly built homes at least in part by the prospect of having a structural home warranty to shield them from the sudden expense of a major structural home repair. Since not all structural warranties are created equal, builders will need to consider what type of home warranty program is likely to meet these unique home buyers’ needs.
Members of Gen Z also prize the convenience mobile technology affords. They’re likely to favor home builder warranty services that allow them to easily submit claims and communicate with warranty service professionals through their mobile device.
- They’re 100 percent digital natives.
Analysts predict Gen Z will usher in a new paradigm for the real estate market. They’re a generation “whose entire world and self-views are crafted by technology, immediacy and access,” Chris says. They don’t distinguishbetween the physical and digital world, but see them as part of the same whole.
As expected, 95 percent of these future homeowners anticipate performing key home buying tasks online. In addition to viewing home listings and taking virtual tours, nearly a third expect to be able to video chat with real estate agents. Although 19 percent say they would purchase a home online, the rest still plan on enlisting a real estate professional.
- They take social media seriously.
Post-millennials are the first generation raised in the era of smartphones, and they’ve never known a world without social media. It’s part of their daily lives. More than half use social media for important tasks like school research assignments.
Nearly a third use Instagram every day, while a quarter check Snapchat daily. Seven in 10 spend two or more hours a day watching YouTube. To reach this highly connected audience, builders and real estate professionals will need to seek innovative ways to leverage social media in the home buying process.
The good news for home builders is that Generation Z is still young, which means there’s time to prepare for the incoming buyers. By looking ahead to anticipate the needs of this massive generation, builders can gain a competitive edge in the real estate market of the future.