Cracking The Code To Homeownership: The Magic of House Hacking Amid Soaring Interest Rates And Inflation Woes

With skyrocketing interest rates and high inflation rates, it's challenging for many people to afford to purchase a home, and it's particularly formidable for younger generations.

Those difficulties have made what's known as house hacking a practical response to homeownership. House hacking is renting out part or all of a home for additional income.

More than half of millennial and Gen Z buyers see renting out a portion of their homes as "very" or "extremely" important, according to Zillow's 2023 Consumer Housing Trends Report.

Importance Of Home Hacking By Generation

Source: Zillow

Gen Z and millennials also view the opportunity to rent out the entire home in the future to produce rental income as important. Millennials lead at 64%, followed by Gen Z at 56% and boomers and the silent generation at 23%.

Zillow's housing trends report found that the median homebuyer in the U.S. is 40 years old, partnered or married, has some college education and is most likely to buy a home in the South. Single-family, detached houses were purchased by 77% of buyers, while townhouses and row houses make up 7% of home sales. Seven percent said they bought condos, 6% bought manufactured or mobile homes, 3% purchased a duplex or triplex and roughly 1% bought a boat, RV, van or another type of home.

Purchasing a home remained challenging with most buyers submitting two offers up as they have for the past two years, and most buyers want digital tools to help them in their search, saying 3D tours would give them a better feel for the space than static photos. They also like the idea of unlocking properties on their phones and touring them in person at their convenience.

The number of first-time buyers continued to increase. After dropping to 37% of buyers surveyed in 2021, the share rose to 50% in 2023. High interest rates are likely responsible for the increased proportion of first-time buyers because those who already are in a home are more likely to stay put.

"These tenured homeowners are likely to have favorable mortgage rates that they would lose if they moved, while first-time buyers are less likely to consider such a trade-off," the report states.

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