Gen Zers Will Own More Homes Than Millennials in U.S.

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The U.S. homeownership rate has climbed to 64.8%, matching highs from recent years after bottoming out at 62.9% in 2016. Still, this is a far cry from all-time highs near 70% that were last reached in 2004 when the housing bubble was in full swing.

When home values were in their trough, younger would-be buyers were suffering from having graduated into a recession with record levels of student debt. Down payment assistance some of their parents may have otherwise offered by drawing from their home's equity had been seriously eroded by crashing prices. Then as home values exploded over 2017 and 2018, this generation had trouble affording a down payment - especially buyers looking to get into their first home - and stayed in the rental market. Largely for these reasons, the homeownership rate for 35- to 44-year-olds has fallen from 66% to 60% in the past decade.

Experts surveyed by Zillow most often expect the homeownership rate among 35- to 44-year-olds to be somewhat higher in 2035 - 38% said so, while 31% said it will be somewhat lower than the current rate and 20% said it will be about the same. Only a small share of experts expects a dramatic swing in either direction - 4% said the homeownership rate among this age group will be much lower 15 years from now, and 7% said it will be much higher.

Experts tend to agree that the preference to own instead of rent and student loan burdens will be major factors in how the homeownership rate trends, but they disagree on the direction they will move. Of those who expect the homeownership rate to increase, more people preferring to own instead of rent and the home supply being less constrained were tied for the most-cited reason for the jump, closely followed by an expectation that student loan burdens will diminish. Those who predict the homeownership rate will decrease most often cited the opposite - a smaller share of households will want to own their home and student loan burdens will be greater.

"The uncertainty of housing experts is tied up in the fact that this past decade has been anything but normal," said Zillow Director of Economic Research Skylar Olsen. "When experiencing unfamiliar dynamics, we must ask whether we will eventually revert to historic patterns or if pillars like preferences, affordability, policy and technology have shifted sufficiently to make this the new normal. Some of the reasons cited by experts as drivers of the future homeownership rate are big and exciting bets, including a belief by many that the home supply will be less constrained. Will more jurisdictions up-zone suburban neighborhoods to allow for smaller units and greater density? Will pre-fab construction take off? Will more big companies relocate headquarters or open satellites in more affordable metros? Time will ultimately have to tell. But in the meantime, it's fun to speculate."

The experts project that U.S. home prices will increase by an average of 2.8% during 2020. This is a slightly more optimistic outlook than the 2.5% rate the panel projected for 2020 both last quarter and one year ago, but lower than the 3.6% growth expected for 2019.

Pulsenomics Founder Terry Loebs underscored that while the panel's average expectation for home value growth may appear benign, that figure masks a range of predictions that has continued to widen over the past decade. Loebs said, "We're in the eighth year of the supposed housing recovery, but persistent uncertainty about the relative appeal and affordability of homeownership, future housing policies and supply trends leaves the experts far from a consensus."

The experts' predictions for nationwide home prices in 2020 range from 7.4% growth to 3.0% contraction, and increased divergence in longer-run expectations also confirms that market conditions remain far from settled. "Our most optimistic group of experts expects 31.2% cumulative home value appreciation through 2024, while our most pessimistic group expects a cumulative gain of just 7.8% over the same period," Loebs explained. "In dollar terms, the difference between these equally plausible scenarios is almost $7 trillion in aggregate home equity value. We've been conducting this survey for more than ten years, and this barometer of housing market malaise is now at a record-high level."