Millennials have been a significant focal point for agents in recent years, accounting for the largest cohort of buyers in the market currently. However, preparing for the next generation of potential clients never hurts.
Generation Z is next in line to impact the buyer market in a significant way according to several industry reports. The group of digital natives already account for 2% of buyers, according to the National Association of REALTORS®, and could make up a significant portion of the market sooner rather than later, according to a realtor.com® report that found that 40% of surveyed Gen Zers planned to purchase a home in five years.
Compared with millennials, who have been broadly and mistakenly viewed as a generation that didn’t want to buy or embrace homeownership earlier in life, Gen Z preferences appear to be a lot clearer upfront, says George Ratiu, manager of Economic Research for realtor.com®.
“That is interesting to me because so far, we are looking at a generation where more than a third are still in college,” Ratiu says. “That has tremendous potential because the entire cohort is significant—in the mid 60 million.”
As millennials mature and move into the upper stages of the housing market, Ratiu indicates that Gen Z buyers will likely provide “tremendous demand” for entry-level housing for years to come.
Understanding Gen Z’s Differences
While the cohort had a small presence in last year’s housing market, there is still a lot that real estate experts don’t know about this emerging generation of buyers—primarily because they make up such a small portion of the current marketplace.
However, several factors differentiate them from the Millennials.
The most significant factor is their general attitudes towards homeownership, says Hana Ben-Shabat, founder of research and advisory firm Gen Z Planet.
In recent research for her book “Gen Z 360”, Ben-Shabat looked at 1,000 people in the Millennial and Gen Z generational group to study their stances regarding culture, work and commerce.
The report found that 87% of Gen Z respondents said they wanted to own a home in the future, compared to 63% of Millennial respondents. Shabat says that is connected to a mix of factors, including the era in which they grew up in.
“Millennials came out of college at the beginning of the Recession, and they were overwhelmed,” Ben-Shabat says. “There weren’t many jobs. Many of them went back to live with their parents and stay well into their 30s.”
The result, she added, was a generation of more risk-averse consumers when it came to their financials.
While many demographers tend to place Generation Z between 1996 and 2012, Ben-Shabat suggests that 1998 until 2016 is a better range—1998 coincides with the launch of Google and the ramp-up of the internet—making the oldest members of generation 24.
“Gen Z, on the other hand, also had major difficulties, they were the kids of the Great Recession and the graduates of the pandemic,” Ben-Shabat says.
She notes that Gen Zers are determined to “learn from the mistakes that millennials made” and secure their financial future as early as possible. Achieving homeownership is one way to accomplish that goal.
“They are already at the point where they already represent $360 billion in disposable income so that no one can ignore that kind of number,” Ben-Shabat says.
Based on her research in her “Show Me the Money” report, Ben-Shabat noted that about 85% of Gen Z respondents claimed they put aside an average of 32% of what they bring in.
While persisting affordability issues present challenges for Gen Zers who are first-time homebuyers, Ben-Shabat notes that the group has shown a “significant willingness to compromise in terms of the size or quality of the real estate.”
She says buyers tend to be aware of their budget and are very willing to take “fixer-uppers” and older homes to climb the property ladder.
For Gen Zers who have already entered the market, Ratiu says that the cohort has gravitated toward suburban markets rather than downtown urban areas like many millennials.
According to realtor.com®’s report, about 49% of respondents who plan to buy in the future prefer to live in the suburbs.
“It tells me that the demand that we’ve seen, particularly in the last two years with the pandemic shift away from urban cores to suburban living, is likely to remain a mainstay of housing demand,” Ratiu says.
Planning for the Future
For those willing to start preparing for future clients of the housing market, industry experts and pundits say that Generation Z could be a boon for agents in the years to come.
“We asked in a survey ‘which steps have you taken to find a house?’” Ratiu says, adding that many respondents looked at listings online.
However, on equal footing in the fall survey was getting in contact with at least one real estate agent.
“To me, that really highlighted the fact that for Gen Zers, relying on advice and guidance is something that they value,” Ratiu says. “In that regard, for real estate agents, I would say there is tremendous opportunity to interact with Gen Z buyers earlier in the process and be a helpful counselor and guide them along the way.”
Richard La Rue is the designated broker of HomeSmart’s Phoenix brokerage. Along with his work at the national real estate brand, La Rue is pursuing his doctoral in intergenerational studies related to the real estate industry.
As agents look to work with Gen Z buyers in the future, he says understanding how to communicate with them will be a critical aspect of game planning.
“Gen Z seems to be the generation that doesn’t want to talk,” says La Rue, adding that members of the cohort rely predominantly on online platforms for communication and consumerism.
“Their decisions are made differently, and rather than having a personal recommendation from a friend, anything with an online recommendation is valued higher,” La Rue continues. “With Gen Z, I find that no one has credibility unless there is an online reference.”
According to La Rue, tech trends that became popular during the pandemic, like Zoom calls and an emphasis on social media and video marketing, are likely to stick around.
“There’s still a lot of agents who don’t like video-based meetings because they are uncomfortable with it, and to that, I say, get over it because this is going to continue,” La Rue says. “Video conferencing will continue long past our memories of the pandemic for several reasons, and our younger generations are communicating well this way; it just makes sense.”
According to Chicago-based agent Andres Aviles of The Millennial Realty Group within Fathom Realty, a robust social media marketing strategy will also be necessary.
A 2021 survey of more than 1,500 Americans from the Pew Research Center found that about 71% of 18- to 29-year-olds said that they use Instagram, compared to 65% for Snapchat and nearly half (48%) said they use TikTok.
Aviles notes that he has received a couple of leads from TikTok by younger aspiring buyers looking to learn more about real estate.
“It’s very much about first steps, and they are not ready right now,” Aviles says. “They are going to be looking in about two or three years, so getting them into your database and starting to market to them by educating them on what to look for and what different things mean is important.”
While a large portion of the cohort is still in school, Aviles advises agents to stay in front of Gen Zers on apps like TikTok and Instagram with marketing materials that are ten seconds or less.
“The more important aspect is designating a particular area or niche in your branding,” he says. “Not necessarily becoming the general REALTOR® influencer but offering a specific niche market perspective that can attract eyes.”
Jordan Grice is RISMedia’s associate online editor. Email him your real estate news to jgrice@rismedia.com.
