Forget the advice that you shouldn’t pay more than 30% of your income on housing. It now takes more than that for a median-income household to rent an average-sized apartment in huge swaths of the country.
That’s a first, according to Moody’s Analytics, which in May reported that in its 25 years of tracking, that 30% threshold had not routinely been breached. Until this year.
Gen Z adults, ages 18-26 and in the prime of life for launching into careers and establishing families, are among the hardest hit. Almost a third of Gen Z adults, in fact, lived with their parents, according to Credit Karma, either because they couldn’t afford to launch out on their own or they boomeranged back as housing prices blew up.
They’re not the only ones feeling the pinch, either. Moody’s Analytics said that 57% of those over 65 were also breaking the 30% rule in 2022 — and things haven’t gotten better.
“It’s an expensive time to be alive, and that’s putting it lightly. Rising inflation, record gas prices and increased housing prices are just a few factors fueling the cost of living crisis in the U.S. and elsewhere in the world. The financial impacts of the ongoing crisis are widespread. However, financially vulnerable groups — in particular, Gen Z — may be feeling the effects more than others, hindering their ability to save money and, eventually, flee the nest,” the article said.
Another third of Gen Z are even harder hit, spending about half of their monthly income on housing, per Credit Karma.
Households that pay more than 30% for rent or mortgage are called “housing cost-burdened,” says the Department of Housing and Urban Development. And that includes most Gen Z renters.
Hoping to buy
Last November, Freddie Mac reported that Generation Z would like to own a home, “though they are increasingly leery of the obstacles they face.” The survey found that more than one-third believe “homeownership at any point” is out of reach financially.
The barriers they identified include saving for a down payment — daunting to 4 in 10 would-be buyers — as well as insufficient credit history, unstable job situation, student loan debt and credit card debt.
Rising mortgage rates, a dearth of available houses and high prices have all created challenges, Pam Perry, single-family vice president of equitable housing at Freddie Mac, said when the survey was released. “Gen Z has taken notice and their hopes of homeownership have waned as the potential issues they may face in purchasing a home have become front and center.”
Watching mortgage rates climb “is one of the most disheartening things in my life,” Nicolette Serbus, 26, told Axios. She had been looking to buy a home for almost two years.
Not giving up
But Gen Z adults are not giving up on the dream of buying a house, many of them migrating to less expensive communities, as The Lexington Herald Leader reported this week. “Generation Z is pacing ahead for homeownership relative to other generations, despite the many hurdles they’ve faced (like the COVID-19 pandemic, rising inflation and a turbulent economy). A recent Redfin study found that 30% of 25-year-olds owned their home in 2022 — more than Generation X (27%) and millennials (28%) when they were that age,” the article said.
Today’s Homeowner ranked cities for how attainable homeownership is for those young adults, putting Wichita, Kansas, at the top, followed by Corpus Christi, Texas; Kansas City, Missouri; and a tie between Indianapolis, Indiana, and El Paso, Texas.
The least attainable, it said, are Seattle, Washington; Los Angeles; Portland, Oregon; Anaheim, California; and Oakland, California.