U.S. house prices are set to rise another 4% this year, which will make it even more difficult for younger generations to get on the property ladder.
Since the pandemic began, the demand for houses has risen exponentially. Supply is not meeting this demand, so in turn, house prices are skyrocketing.
However, the current housing market could present an advantage for some. So, which generations stand to benefit from the current state of the housing market?
Gen X-ers are snapping up homes across the US, and seem to be benefitting from the current housing situation. To learn why Gen X seems to be winning the current housing market, and how the other generations are faring on the property ladder, keep reading.
Where Is Everyone Else?
Boomers
Boomers are those that were born in the midst of the second world war. As an older generation, many Boomers already own homes, and 76% do not plan on selling. Boomers want to spend their retirement years in their current homes instead of in retirement communities.
When boomers retain their homes which are potentially larger spaces than they still need, this doesn’t help the current supply shortage in the real estate industry.
The housing shortage isn’t just impacting Millennials, and Gen Z. The Boomers without houses are currently worse off than the Millennials as Boomers can only afford 11 out of 100 counties in the US in today’s housing climate.
Millennials
Millennials currently account for 43% of homebuyers in the market right now. Compared to other generations, they have the resources and savings to become homeowners and gain a competitive edge with their offers in real estate transactions.
The median income for Millennials is $63,906 in Texas, with the overall median household income for the city being $56,818.
Millennials are therefore able to place higher offers on homes, which makes these buyers more successful in their home searches.
66 counties in Texas are still too expensive for Gen X-ers to buy homes. Millennials do not have the significant advantage that Gen X-ers hold right now. However, Millennials are still better off than the younger generation – Generation Z.
Gen Z
Gen Z-ers are unfortunately experiencing the largest disadvantage in the housing market right now. The younger generation simply cannot keep up with the rising cost of homes. Based on their median income, Gen Z-ers cannot afford a mortgage for any homes in 100 counties in the US because they earn the lowest wage of every age group in Texas.
According to this report on the median income in Texas, Gen Z-ers are making around $36,987 annually, which is almost half the median annual earnings of Gen X-ers. This is nearly $20k less than the median household income in Texas, which will have huge repercussions on Gen Z-ers’ ability to buy a house.
Without a substantial wage, they cannot afford to make a sizable down payment nor pay steep mortgage fees for a house of decent size and in a good location.
Why Is Gen X In The Lead?
Without realizing it, Gen X-ers are beating out every other generation in the race to get a spacious, good quality home in their ideal location. Of all generations, they can afford homes over the median cost in most counties in the US, and there are many reasons for this, but the most significant factor is income.
For Gen X-ers, this value is greater as their wage is larger than that of other generations. According to Point2, people between 45 and 64 earn the largest median wage of all age groups in Texas, coming in at an average of $64,470 per year. Therefore, Gen X-ers can afford to spend just short of $20k per year on a mortgage which opens up their housing options more.
Point2’s study demonstrates that Gen X-ers can afford to purchase property in 70 out of 100 counties in the US. They could even afford to pay beyond the median cost for a house in many counties due to this significant income. Gen X-ers have the greatest opportunity to become homeowners and take an impressive lead on these generations that doesn’t look like it will close any time soon.
Final Thoughts
When entering the housing market, you should first consider the 30% rule. Your mortgage cannot exceed 30% of your annual earnings as you could find yourself in a potentially unstable financial position. A REALTOR® can assist you in the process. With that in mind, you need to calculate 30% of your annual income to calculate the maximum mortgage you can afford.
