Gen Z Is Buying Homes in 2026 — But Here Are 5 Risks First-Time Gen Z Buyers Can’t Afford To Ignore
Gen Zers are a bit young to be dominating the housing market, but they are starting to make inroads. The generation currently ages 14 to 29 accounted for 4% of recent homebuyers, up from 3% last year, according to the National Association of Realtors (NAR). Meanwhile, first-time buyers fell to just 21% of all buyers, the lowest share since the NAR began tracking the data in 1981.
This means Gen Z is making progress during a tough time for new buyers, which is encouraging. But make no mistake, there are still plenty of risks that Gen Z has to navigate, from high prices, elevated mortgage rates, limited inventory and competitive buyers making cash offers.
Before rushing into a new home purchase, here are the five risks that Gen Z buyers should understand.
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1. Buying Based on Your Approved Amount
Probably the biggest housing risk for any generation is the temptation to overspend. Just because you got approved for a $400,000 mortgage based on your debt-to-income (DTI) ratio doesn’t mean that you can truly afford that size of a loan.
Your DTI doesn’t include money you spend on things like food, gas, medical bills, travel, subscriptions or family support. You may have no debt at all and a sterling DTI, but if you don’t have at least a few thousand dollars extra in your budget every month, you can’t afford your new home.
And remember, you’ll still have to pay property taxes and insurance in addition to furnishing your home. You may even owe HOA dues, which in some locations can run over $1,000 per month.
If your monthly mortgage payment only works when everything goes right, the house you’re looking at buying is probably too expensive.
2. Underestimating Cash Needed at Closing
Many buyers overlook closing costs when purchasing a home, thinking only about the down payment and the actual monthly mortgage cost. But closing costs can add thousands of dollars to the bill when you buy a home.
Closing costs are various fees that are added on to your home transaction. Per the Consumer Financial Protection Bureau (CFPB), lender fees, title costs, prepaid insurance and escrow deposits are just a few examples.
Be sure to get a list of all the fees that you’ll have to pay to close a transaction before you make your decision.
3. Draining Your Emergency Fund To Buy
Your emergency fund shouldn’t be used as a homebuying fund. It can be tempting to dip into an emergency fund if you just need a few thousand dollars more to buy a home. But that can be a financial mistake.
As a homeowner, all of the things that you used to rely on your landlord to fix, from a broken water heater to a roof leak or a plumbing repair, now become your responsibility. If there’s nothing left in your emergency fund, you may end up taking on additional debt, right after you bought a new home.
Younger buyers with no emergency funds are at additional risk, as they may not yet be earning a sizable income that can help cover any shortfalls.
If it takes every single dollar you have to buy a home, it might be a good idea to wait until your financial picture strengthens.
4. Ignoring Mortgage Insurance
Many first-time homeowners can’t afford to put 20% down, especially with home prices near all-time highs. But the CFPB noted that borrowers who put less than 20% down typically need mortgage insurance, which increases the cost of the loan.
Mortgage insurance may be worth paying if it prevents you from waiting years to buy a home you like. But you absolutely must factor that cost into your affordability calculations.
5. Competing With Cash Buyers
As if high prices and mortgage rates aren’t enough of a challenge, Gen Z buyers are also competing with cash buyers. According to Realtor.com, all-cash transactions represented nearly one-third of all home sales in the first half of 2025.
Sellers tend to favor all-cash buyers and this works against first-time buyers who can only put 10% or 20% down.
Accept the fact that you can’t compete head-on with a cash buyer unless you’re willing to make some concessions. For example, you may have to waive inspections or buy a home “as-is” if you want to top an all-cash buyer. And if that’s the case, it might be better to move on rather than stretch yourself to get a “win.”
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This article was provided by MoneyLion.com for informational purposes only and should not be construed as financial, legal or tax advice.
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