In the past few years, homebuilders have observed a new buyer entering the market for homes: Gen Z. There are currently five generations of homebuyers, and they all have different consumption patterns as well as behaviors when making large purchases. It’s important to understand generational differences in terms of consumer behavior so homebuilders know how to effectively target these different populations of people. With all these factors in mind, let’s dive into who these generations are and what their behavior looks like when considering purchasing a home.
Ages: 78-95
Characteristics: The silent generation is one with characteristics of extremely strong work ethic and resilience. This generation exemplifies hard work and understands what it takes to be successful.
In terms of homebuying: The Silent Generation currently makes up the smallest share of homebuyers in the market. Their buying needs are unique because they value close proximity to family and friends and tend to downsize from their move-up product home to enjoy smaller, more intimate spaces. They are also looking to buy homes in retirement neighborhoods or are moving into a healthcare facility as they get older in age.
Ages: 59-77
Characteristics: Some general characteristics of the Baby Boomer generation are that they focus on discipline, strong work ethic and independence. This generation is very resourceful and experienced, as they are in the age range of holding a leadership position at their workplace.
In terms of homebuying: Baby Boomers currently make up 20.6% of the United States population and make up the largest share of buyers and sellers in the housing market. As this generation increases in age, they tend to look for houses near family that they can live in for the rest of their lives. In more recent years, older Baby Boomers have begun the process of downsizing and make up 53% of sellers in the housing market. Those that aren’t downsizing are looking for nicer, newer retirement homes.
Ages: 43-58
Characteristics: Generation X is a population that was heavily influenced by the growth of capitalism and consumption. This generation tends to be more materialistic and independent as their coming-of-age years were focused on embracing individualism.
In terms of homebuying: the generation with the highest earnings per household is Generation X. They also make up 19.6% of the population. Their homebuying motives revolve around proximity to school and job locations. Gen X tends to be more materialistic and values status. This bleeds into their motives when it comes to homebuying. They not only have the highest household income of any generation, but this generation sees the highest spending habits among all age groups.
Generation X has the second highest population of first-time homebuyers, closely trailing Millennials. Other than first time homebuyers, Generation X also has a generous share of people owning a second home or investment property. This diversity of buyers makes them an attractive customer to all home builders and real estate companies.
Ages: 27-44
Characteristics: Millennials encapsulate characteristics that are extremely unique to them based on the period they were raised in. Millennials range from 27-42 years old and have experienced the movement of globalization as well as a stable economy. Some behavioral characteristics that make up millennials are that they tend to be very self-oriented and idealistic.
In terms of homebuying: This generation makes up 21.7% of the U.S. population and are the current leaders of the first-time homebuying market. Millennials have seen lower homeownership rates at younger ages than that of their Gen Z counterparts. According to a study conducted by RedFin, 27% of Millennials aged 25 owned a home in comparison to 30% of Gen Zers at the age of 25 owning a home.
Ages: 11-26
Characteristics: Gen Z characteristics are continuously being uncovered as this generation gets older, however, Gen Z is the first digital native population of people and has been raised on technology. Consumption patterns of Gen Z seem to revolve around companies who have sustainability and tech savviness in mind. They also value transparency and relationships with companies they buy from. Unlike millennials, Gen Z shows a “high preference for regular employment rather than freelance or part-time work.”
In terms of homebuying: After growing up with a recession and a global pandemic, Gen Zers tend to be more realistic with their money and are more debt averse than previous generations. Although they tend to be more particular about what they spend their money on, Gen Z has already seen a large percentage of those in their mid-twenties taking advantage of homeownership instead of renting, which shows for a promising future for homebuilders targeting this population.
With Gen Z now entering the “first time homebuyer” category, there’s still a lot to uncover and learn from their buying patterns as well as understanding what is important to them in a new home. Being aware of these generational differences in mindset and values when selling to different buyers is going to be important in moving forward in the homebuilding industry.
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