Fixer-Uppers and Financial Regrets: Gen Z's Homeownership Journey

The homeownership dream seems to be fading away inch by inch every day, with mortgage rates holding steady at over 6% and median home prices continuing to rise. The younger generation, particularly Gen Z, is highly vulnerable to the increasing affordability challenges, having recently entered the workforce. 

A recent report published by Clever Real Estate highlights that about one in five Gen Zers, or 22%, cite a lack of affordable starter homes as a significant hurdle to owning a home. Homeownership is often considered a cornerstone of wealth, with 58% of survey respondents stating that purchasing a house is one of the key steps to becoming wealthy. However, 60% of the surveyors think it's a pipe dream and are worried that homeownership might not be in their cards. 

Housing affordability plunged by over 33% between 2021 and 2023 as the ultralow interest rates during the COVID-19 pandemic triggered a buying spree. In fact, according to a Redfin report, 2023 was the most unaffordable year for purchasing a home. 

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Declining Mortgage Rates: A Sign of Relief? 

The 30-year fixed mortgage rate declined to 6.4% earlier this month, marking the lowest rate since April 2023. While this signaled relief among current homeowners, it offered little respite for Gen Z, who have struggled with rising costs since joining the workforce. 

For some, the solution lies in purchasing fixer-uppers – existing houses needing varying degrees of maintenance work and typically offered at lower prices.

A fixer-upper, a somewhat dilapidated existing home requiring maintenance or repair, is often priced significantly lower than the median single-family home. The average price of a fixer-upper is approximately $283,000, 29% lower than that of a newly built or recently renovated home. 

However, the survey found that nearly 63% of Gen Z saved less than $10,000, far less than the average required down payment. With more than half of the youngest working and struggling to pay rent, mortgage payments and the hidden housing costs might be too much to take on. 

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The Allure and Pitfalls of Fixer-Uppers

It's no secret that fixer-uppers come with their own set of challenges and headaches, and often, the repair bills cost more than the price of a standard home. 

40% of Gen Z homeowners who purchased a fixer-upper are already questioning their decisions, and 27% express outright regret. 

“A lot of them are first-time buyers; they don't really know the true costs of homeownership and how these renovations and repairs can really be a lot,” Jaime Dunaway-Seale of Clever Real Estate stated.

Despite surmounting challenges to affordability, Gen Z still considers homeownership to be one of the major financial feats of life. To that end, the younger generation is willing to put their health at risk if they have a shot at building real estate equity. The Clever Real Estate survey found that 56% of Gen Z would consider buying a home with asbestos despite the health risks associated with the mineral fiber. Furthermore, 54% of the respondents are willing to buy a home without heat conditioning or heating. 

However, just buying a home cannot provide peace of mind. 68% of Gen Zers who overcame all barriers to purchase a home claim they regret the decision. About 21%, on the other hand, stated that they did not have enough knowledge. Interestingly, 38% of survey respondents cited TikTok as a source of information. 

Financial Strain and Parental Support

The financial strain on Gen Z is evident in their reliance on family support. According to a Bank of America report, 46% of Gen Zers between 18 and 27 depend on financial assistance from their family. Furthermore, 52% say they don’t earn enough to live the life they want, with day-to-day expenses being a significant barrier to financial success. 

According to a Pew Research Center report, approximately 25% of young adults live with their parents or in a multigenerational household, marking a sharp increase from 9% reported 50 years ago. 

Ready To Profit From Real Estate Without The Hassles Of Homeownership?

The current high-interest-rate environment has created an incredible opportunity for income-seeking investors to earn massive yields, Certain private market real estate investments are giving retail investors the opportunity to capitalize on these high-yield opportunities and Benzinga has identified some of the most attractive options for you to consider. 

For example, Arrived Homes the Jeff Bezos-backed investment platform just launched its Private Credit Fund, which provides access to a pool of short-term loans backed by residential real estate with a target 7% to 9% net annual yield paid to investors monthly. The best part? Unlike other private credit funds, this one has a minimum investment of only $100. 

Don't miss out on this opportunity to take advantage of high-yield investments while rates are high. Check out Benzinga's favorite high-yield offerings. 

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