Navigating the Housing Market: How Gen Z and Millennials are Embracing House Hacking

Dated: November 26 2023

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The Rise of House Hacking Among Young Homebuyers

In today's challenging real estate market, where high prices and soaring interest rates make homeownership a distant dream for many, a new trend is emerging among Gen Z and millennial homebuyers: house hacking. This innovative approach involves renting out a portion of one's home or an entire property to generate an additional income stream, helping to offset mortgage costs and other expenses.

The Growing Popularity of House Hacking

According to a recent Zillow report, nearly 4 in 10 recent homebuyers view house hacking as a crucial opportunity, with this sentiment growing by eight percentage points in the last two years. The trend is particularly prevalent among younger generations, with 55% of millennials and 51% of Gen Z homebuyers expressing positive views on this strategy.

The Financial Landscape

The median sale price for a house in the U.S. was $413,874 in October, marking a 3.5% increase from the previous year. Concurrently, the average rate for 30-year mortgages hit a 23-year high of 8% in October. These figures underscore the affordability challenges facing potential homebuyers, particularly younger ones who may not have substantial savings or high incomes.

The Benefits and Considerations of House Hacking

House hacking can provide significant financial relief, but it requires careful consideration. Potential house hackers must ensure they can afford the mortgage without relying on rental income, as banks typically do not consider potential rental earnings when approving loans. Additionally, the current rental market dynamics, with an increase in available apartments and a cooling of rental market inflation, might affect the viability of renting out portions of a property.

The Future of House Hacking

While house hacking offers a creative solution to the affordability crisis, its future is uncertain. The increase in available rental units, particularly smaller apartments, may make it more challenging to find tenants. However, given the massive shortage of affordable housing in the U.S., competitively priced rental options can still be a reliable source of income.

Conclusion

House hacking represents a smart, albeit temporary, solution for young people grappling with the high costs of homeownership. It's a testament to the resilience and ingenuity of Gen Z and millennials, who are finding new ways to achieve their dreams of owning a home in a challenging economic landscape.

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Michael Devlin

I'm Michael Devlin, and I've had the privilege of leading a talented team at eXp Realty as the Mega Team Leader. Over the years, my focus has been on nurturing the growth of real estate agents through....

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