Priced out of homes, priced into stocks.
An interesting environment for young people.
Today’s piece is largely just a thought I’ve had for some time. To be honest, it’s pretty much just how I’ve personally felt. I’m not going to quote any research to support this, any statistics or numbers, this is just something I have been thinking about for a long time.
In the best way possible, I think that most young people are being cornered into investing in the stock market. For many people that are my age, even into their early 30s, home prices are just ridiculous. Even still, many of us have a goal of home ownership.
But when it comes to actually buying, rates are much less favorable than they were just a few years ago and prices seem extremely high. Saving cash for years on end to eventually make a downpayment can sandbag our retirement savings. While we cannot know what the future of the market holds for us, the past few years have been absolutely stellar.
A home purchase can quickly result in a 6-figure outflow. Between the down payment, closing costs, and any potential renovation, it can be a significant amount of money.
And for a lot of young professionals, a 6-figure down payment can seem like a pipe dream. Even if someone were able to save $2,000 per month, it could take them 4 full years to save this amount of cash.
To some extent, I think that Gen Z is more comfortable investing because they feel entirely stuck when it comes to the housing market. If someone has $20,000 saved, and is chipping away each month to save more, that $20,000 getting cut in half in the market isn’t really moving the meter when it comes to something like a home purchase.
The same way that $20,000 doubling isn’t really moving the meter for someone looking to purchase a home.
To me, it feels like swings in the market relative to most people’s savings amounts are dwarfed by even just the downpayment for a home.
And this seems like a bad thing. But Gen Z isn’t afraid of investing. We are actually pretty solid at it. Being unable to dump our cash into homes, we started contributing to retirement accounts and brokerage accounts.
The home purchase can be flexible. We can extend timelines, we can continue to rent.
For Gen Z folks who can save, they are buying productive assets, they just might not be buying homes yet. I think it is great. I even got to comment on this topic in Barron’s.
Our time for homes will come but our generation has done a pretty solid job of finding alternative ways to build the foundation for our financial futures.
The seemingly hopeless housing market has turned many of us to the stock market. I actually think that is a great thing.
This is for informational purposes only and is not intended as legal, tax, or investment advice or a recommendation of any particular security or strategy. The investment strategy and themes discussed herein may be unsuitable for investors depending on their specific investment objectives and financial situation. Opinions expressed in this commentary reflect subjective judgments of the author based on conditions at the time of publication and are subject to change without notice. Past performance is not indicative of future results.