Debate Between Gen Z and Young Millennials: Rent Forever or Dive into High Mortgages

Generation Z and younger millennials have the misfortune of being ready to buy a home amid a prohibitively expensive housing market.

As the youngest generation of adults looks to buy their first home, they’re finding it’s often cheaper to just keep renting than to invest in a mortgage right now.

Some are waiting out the unwelcoming housing market with a seemingly endless cycle of rent payments, but some are biting the bullet and purchasing now.

“We bought so our money wouldn’t go to someone else’s mortgage,” a Gen Z homeowner and new mother of a baby boy in Virginia told The Daily Wire.

She and her husband wanted to own land, she said. They plan on putting a few extra thousand dollars toward the principal of their mortgage every year, and they also invested in a larger down payment to get a lower fixed interest rate.

“There are ways to manipulate the system, but again, you usually need some money up front to do so,” she said.

She added that there is “a lot of ignorance” among young home buyers.

“Every young homeowner I have spoken to looks like a deer in the headlights when I mention how crazy it is that your interest rate can end up costing you at least double the cost of the house across 30 years,” she said. “And most people don’t realize they are paying mostly interest during the early mortgage years and the bulk of the principal later on. Works great for the loaners.”

Despite the challenges, there have been big upsides to owning a home, she said.

“Homeownership has made us feel unrestricted in our homemaking and privacy,” the mom said.

A Gen Z man who is getting married this summer in the Washington, D.C., area said he is planning to wait a year or two before buying a house. His fiancée, a younger millennial already owns a condo, and they plan to hang onto that property as the value goes up, although they hope to move into a second home once they have their first child.

“A medium to large-sized house is pretty much guaranteed to be a million bucks,” he told The Daily Wire. “The ‘350k or lower’ dream is kind of out the window … After a quick glance at the market a couple months ago, it looks like the expectation is 700k or more, and that’s before all that yucky interest.”

Home prices are up 47% since the beginning of 2020, while rent is up more than 20%. Homelessness has spiked as well, rising 12% in 2022, according to data from the Department of Housing and Urban Development.

Renting a two-bedroom residence is now actually cheaper than buying that property for about 89% of Americans, according to a November analysis by The Economist.

Back in 2020, that was true for only 16% of Americans.

Meanwhile, the housing crash that many potential home buyers hoped for does not look likely to happen. In November, nearly half of Americans, 44% said they thought the housing market could crash in the next year, according to a LendingTree consumer survey. Economists say they do not expect a housing crash either this year or even in 2025.

In fact, house prices are expected to keep rising as much as 4.1% this year, according to the Mortgage Bankers Association. Mortgage prices are expected to dip but not by much, and rent prices will likely remain about the same due to a glut of newly built apartment buildings with low demand.

Nevertheless, the tough market has not stopped millennials and even some Gen Z-ers from buying homes, perhaps simply because they are fed up with waiting for the market to turn in their favor.

About 38% of all home buyers were millennials last year, according to a report from the National Association of Realtors, up from 28% in the previous year. Among younger millennials ages 25 to 33, 75% were buying a home for the first time.

The younger Gen Z buyers ages 18 to 24 made up only 3% of home buyers last year, showcasing both the difficulty of breaking into the housing market at a young age as well as the tendency of today’s young adults to wait before tying themselves down to one property.

Baby Boomers, the wealthiest generation is also contributing to the housing shortage by staying put in their current homes, reluctant to lose the lower mortgage rates they locked in during less expensive years. Previously, older generations would typically move into smaller homes as they aged, freeing up inventory for younger families, but nearly 40% of Boomers have lived in their home for at least 20 years, according to Redfin.

This shortage is causing any property that does go on the market to sell quickly at very high prices, often above the asking price.

Despite the daunting circumstances, some younger buyers remain optimistic, although they have adjusted their expectations.

The engaged Gen Z-er said he remains hopeful that he and his fiancée will find something they both love.

“I basically just want a three-bedroom house with a large backyard and some quiet. It exists, but it’s just a lot more than I thought it was,” he said. “My plan is to put a really big down payment on whatever we get.”

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