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For many Gen Zers, homeownership is a distant dream.
High home prices, coupled with the need for substantial down payments and closing costs, create a significant barrier to entry for young adults seeking to build wealth through real estate.
However, a new wave of investment platforms is emerging, offering fractional ownership as a more accessible entry point.
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“Coming of age amid skyrocketing home prices and pandemic-era economic turbulence has given some of Gen Z financial whiplash, particularly when it comes to owning a home,” said Cameron Wu, vice president of investments at the Jeff Bezos-backed real estate investment platform Arrived.
“There’s this common perception that owning a home is just not something that young people can do. This is one of the key reasons we launched Arrived, to create ways for people to invest in real estate at any price point.”
Wu says it’s working. Fifty-eight percent of Arrived users born after the year 2000 get started with an investment of just $100. This helps them grow their wealth and invest in real estate without struggling to save for a down payment that gets more expensive each year.
See Also: Warren Buffett once said, “If you don’t find a way to make money while you sleep, you will work until you die.” Here’s how you can earn passive income with just $100.
Other strategies Gen Z employs to lower the barrier to investing in real estate are:
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Federal Housing Administration (FHA) loans: FHA loans are popular with Gen Z because they require a lower down payment and credit score than conventional loans.
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Grants and down payment assistance: Many Gen Z homebuyers seek government grants and programs designed to help first-time buyers with their down payments.
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Financial gifts: Many Gen Z expect financial help from family members for their down payments. Some are even considering using inheritance money.
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Making compromises: Over half Gen Z homebuyers are open to making sacrifices to achieve homeownership sooner. This could include compromising on factors like price, location or size of the house. Many are willing to consider fixer-uppers requiring maintenance or repairs for a better price. For some, affordability trumps safety, with a quarter willing to live in less safe neighborhoods.
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Targeting affordable markets: Gen Z is looking for areas where they can afford to buy. Cities like Pittsburgh, St. Louis, Cleveland and Detroit offer properties under $165,000, making them attractive options for Gen Z with lower incomes.
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Creative ownership structures: Some Gen Z homebuyers are exploring alternative ownership structures to enter the housing market, such as co-buying with friends or moving in with family.
