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LendingTree Ranks the Most Popular U.S. Cities for Gen Z Homebuyers

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A new LendingTree study looks at where Gen Zers are buying homes and reports that 24% of Gen Z buyers don’t receive any down payment assistance.

Despite the ongoing economic turmoil wrought by the COVID-19 outbreak, many members of Generation Z (born after 1996) are attending college, starting their careers and even buying homes for the first time.

Gen Zers comprise just under 10% of potential homebuyers in any of the nation’s largest metros. But as the economy recovers and more of them reach adulthood, Gen Zers are poised to make an even greater mark on the housing market. While their overall impact on housing may be hard to predict, it’s clear that some Gen Zers are eager to join the ranks of homeowners sooner rather than later.

To determine where Gen Zers are looking to buy homes, LendingTree analyzed mortgage purchase requests made across the nation’s 50 largest metros by people aged 18 to 23 on its online marketplace between Jan. 1, 2020 and Oct. 1, 2020.

Key findings

  • Salt Lake City, a metro with a population that tends to skew younger, and the relatively inexpensive Oklahoma City and Indianapolis are the metros where Gen Zers make up the largest percentage of purchase requests. In Salt Lake City, 8.47% of purchase requests came from Gen Zers. In Oklahoma City and Indianapolis, the share of Gen Z requests are 8.01% and 7.74%, respectively.
  • In super-expensive areas like San Francisco, San Jose, Calif. and New York City, Gen Zers are making the smallest percentage of purchase requests. Gen Zers made just 2.19% of the purchase requests in San Francisco, 2.98% in San Jose, Calif. and 3.30% New York.
  • Gen Zers in San Francisco, San Jose, Calif. and New York City also had the highest average credit scores in the nation. Because loan amounts in these metros are so high, lenders usually require borrowers to have higher credit scores to get approved. It is for that reason that the average combined credit score for these three areas is 703, which is 39 points higher than the average for all 50 of the nation’s largest metros, 664.
  • Gen Zers in Birmingham, Ala., Memphis, Tenn. and Virginia Beach, Va., had the lowest average credit scores across the nation’s largest metros. Credit scores in these three areas were 641, 644 and 647 respectively.
  • Nearly a quarter of Gen Zers surveyed by LendingTree reported receiving no down payment assistance when purchasing a home. While 86% of Gen Zers received help to come up with a down payment from at least one source, including their parents or their employer, 24% said that they came up with the funds without assistance.

Most popular metros among potential Gen Z homebuyers

1. Salt Lake City

  • Share of mortgage requests coming from Gen Zers: 8.47%
  • Average Gen Z potential buyer age: 21.5
  • Average Gen Z potential buyer credit score: 672
  • Average Gen Z potential buyer down payment amount: $32,961
  • Average requested loan amount from Gen Zers: $244,365

2. Oklahoma City

  • Share of mortgage requests coming from Gen Zers: 8.01%
  • Average Gen Z potential buyer age: 21.6
  • Average Gen Z potential buyer credit score: 652
  • Average Gen Z potential buyer down payment amount: $19,130
  • Average requested loan amount from Gen Zers: $141,396

3. Indianapolis

  • Share of mortgage requests coming from Gen Zers: 7.74%
  • Average Gen Z potential buyer age: 21.5
  • Average Gen Z potential buyer credit score: 650
  • Average Gen Z potential buyer down payment amount: $18,904
  • Average requested loan amount from Gen Zers: $146,349

Least popular metros among potential Gen Z homebuyers

1. San Francisco

  • Share of mortgage requests coming from Gen Zers: 2.19%
  • Average Gen Z potential buyer age: 21.6
  • Average Gen Z potential buyer credit score: 710
  • Average Gen Z potential buyer down payment amount: $124,530
  • Average requested loan amount from Gen Zers: $575,723

2. San Jose, Calif.

  • Share of mortgage requests coming from Gen Zers: 2.98%
  • Average Gen Z potential buyer age: 21.7
  • Average Gen Z potential buyer credit score: 707
  • Average Gen Z potential buyer down payment amount: $84,163
  • Average requested loan amount from Gen Zers: $480,970

3. New York City

  • Share of mortgage requests coming from Gen Zers: 3.30%
  • Average Gen Z potential buyer age: 21.7
  • Average Gen Z potential buyer credit score: 691
  • Average Gen Z potential buyer down payment amount: $65,290
  • Average requested loan amount from Gen Zers: $318,927

Nearly 1/4 of Gen Zers report receiving no down payment assistance. What about the rest?

One of the biggest challenges a potential homebuyer faces is affording a down payment on a home. This is especially true for younger homebuyers who usually lack the savings to make a substantial down payment without any help.

So how are Gen Zers managing to make down payments?

A recent survey by LendingTree found that 84% of Gen Zers surveyed are receiving some sort of down payment assistance. Of that number:

  • 34% reported getting help from a parent
  • 24% reported getting help from a friend or a family member who wasn’t a parent
  • 13% reported getting help from their employer
  • 13% reported getting help from a down payment assistance program

Homebuying tips for Gen Zers

In many parts of the country, home prices have continued to climb as inventory has remained low. Here are tips to help you gain an edge when making an offer on a home:

Boost your credit scores and savings. Because it’s a competitive seller’s market in many areas, would-be homebuyers need strong credit scores and substantial cash for a down payment in order to make a purchase. Build your homebuying fund now, and check your credit report and scores to ensure there are no errors. Improve your scores by making on-time payments each month and paying down your balances to lower your debt load.

Shop around for a mortgage. Before you shop for a home, shop around for a mortgage and get preapproved. This will help you pinpoint how much home you can afford and narrow down your home loan options. Compare rates and loan terms from at least three to five different lenders.

Consider first-time buyer programs. Look into programs available to first-time homebuyers that offer low down-payment options. These programs can help make purchasing a home with a lower credit score or small down payment more attainable.

Methodology

To conduct this study, LendingTree analyzed mortgage requests from borrowers aged 18 to 23 years from Jan. 1, 2020 to Oct. 1, 2019, along with requests from the overall population of mortgage seekers.

The city rankings are generated from the percentage of total purchase mortgage requests received by LendingTree from borrowers in the Gen Z generation.

Survey data comes from a survey commissioned by Qualtrics, an experience management firm, which conducted a survey of 62 Gen Zers from April 23-30, 2020. Numbers from the survey were rounded to the nearest whole number.

LendingTree research analyst Jacob Channel contributed to this report.

 

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