This year's housing market has presented a challenging landscape for millennials and Gen Zers, as soaring home prices and elevated mortgage rates have made the American dream of homeownership increasingly elusive. Despite their strong desire to own a home, younger generations are grappling with several barriers that stand in their way.

According to the Bank of America Institute, approximately 60% of millennials and Gen Zers believe that homeownership is more important than it was for their parents' generation. However, the difficulty of saving for a down payment, coupled with high home prices and relatively elevated mortgage rates, has created a daunting environment for prospective buyers. Experts in the housing industry agree that these challenges are unlikely to ease anytime soon.

Andrew Spieler, a distinguished professor at Hofstra University's Frank G. Zarb School of Business specializing in real estate finance and investment, evoked a sense of skepticism about the future prospects for young homebuyers. He stated, "I don't know if it's ever going to be a young person's good time to buy a home. The trends have been against them for a long time."

Contrary to common perception, housing market conditions do not change rapidly, cautions Spieler. Tracking mortgage rates and home prices alone oversimplifies the equation. Spieler predicts that any significant difference in the housing market will likely materialize after 2024, not before. While the Federal Reserve began raising interest rates only a year and a half ago, Spieler notes that this is a relatively short duration in the real estate realm. Moreover, a unique dynamic is at play, where mortgage rates have been higher than in the past two decades, yet home prices continue to rise. Sellers, reluctant to adjust their prices immediately, can take time to react to the impact of higher interest rates on buyer affordability.

In their quest to overcome the challenges of the housing market, millennials and Gen Zers are resorting to creative measures. In 2023, some prospective buyers within these generations took on additional side gigs to bolster their savings for a down payment. Others turned to their wedding registries, seeking cash gifts to fund their first home purchase. Amanda Pendleton, a personal finance expert at Zillow Home Loans, acknowledged that saving up for a traditional 20% down payment, which could amount to $70,000 based on a median home price of $350,000, can be a daunting task for young couples.

Notably, first-time buyers are finding various ways to finance their down payments, often relying on a combination of personal savings and financial help from family or friends. Nicole Bachaud, a senior economist with Zillow, revealed that 60% of first-time buyers used multiple sources to secure their down payment. Furthermore, real estate professionals have observed a significant increase in family involvement, with parents assisting their younger counterparts by contributing towards the down payment, co-signing on loans, or covering monthly mortgage payments.

The scarcity of affordable housing has led some millennials and Gen Zers to take unconventional approaches. Beatrice de Jong, a real estate broker associate in Los Angeles, shared that many of her younger clients are purchasing homes with the intention of accommodating family members, such as having parents live in separate units like accessory dwelling units (ADUs) or sharing the same house. This intergenerational cohabitation is becoming increasingly common due to the high prices of single-family homes.

Looking ahead to 2024, the housing market is expected to maintain its challenging stance for millennials and Gen Zers. Forecasts indicate that mortgage rates are likely to hover around the 6% range throughout the year. The reality of affordability constraints is forcing prospective buyers to be more pragmatic in their expectations. Purchasing a condo as a first home is becoming a more viable option for many millennials, given the exorbitant prices of traditional suburban houses with desirable features like a two-car garage.

As the housing market continues to present obstacles for younger generations, the creative strategies employed by millennials and Gen Zers to realize their dreams of homeownership will play a pivotal role in shaping their housing journeys in the coming years.