While Gen Z, born between 1997 and 2012, is gradually entering adulthood and venturing into the world of homeownership, they seem to be shying away from more expensive cities like San Francisco and San Jose, according to a recent LendingTree study.
As the study reveals, Gen Zers account for an average of 14.91% of potential homebuyers across the nation’s 50 largest metros, and they're gravitating more towards affordable places like Salt Lake City, Oklahoma City, and Birmingham, Alabama. But what does this mean for the pricey Californian cities that were once so coveted by young professionals and homeowners alike?
The study, conducted by analyzing mortgage purchase requests from adult Gen Z users of the LendingTree platform between January 1 and December 31, 2022, found that San Francisco, New York, and San Jose ranked as the least popular cities for Gen Z homebuyers. With share of mortgage requests from Gen Zers at 7.76%, 8.88%, and 9.70% respectively, these locales seem to be losing their grip on the youngest generation of home shoppers. This might sound alarming to some, but also signals an opportunity for other metros to capitalize on Gen Z's changing preferences.
While San Francisco and San Jose are known for their tech-centric job markets and astronomical housing costs, LendingTree's study also revealed that six of the ten least popular metros for potential Gen Z buyers are in California, emphasizing the huge hurdle the state's expensive real estate market poses for younger buyers. But if not these urban centers, then where do Gen Zers fancy?
As mentioned earlier, affordable metros like Salt Lake City seem to be winning Gen Z's heart, with 22.59% of mortgage requests in the city originating from the youngest adult demographic. Aside from affordability, the city boasts a strong job market, a mix of urban and rural amenities, and an overall environment conducive to first-time homebuyers. Additionally, Oklahoma City and Birmingham, Alabama, follow closely behind, with 22.36% and 20.79% of mortgage requests being from Gen Z respectively.
Credit scores, down payment amounts, and mortgage request amounts also vary significantly across the US. Gen Z's average credit score for mortgage purchases ranged from a high of 707 in Buffalo, New York, to a low of 651 in New Orleans. The average down payment among potential Gen Z homebuyers in San Jose was $77,786, a significant difference compared to the $18,752 average in Oklahoma City – indicating that young buyers are indeed willing to stretch their budgets if they believe the investment will yield long-term value.
