High rents and mortgage rates squeeze Gen Z
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With rents hovering at historic highs and soaring mortgage rates pushing up the cost of buying a house, making the leap to homeownership has seemingly never been harder.
Why it matters: Owning your own home is a critical step in building wealth in the U.S., but younger Americans increasingly can't swing it, and instead are stuck renting — at steep rates that are eating into their income.
- Meanwhile: Older Americans on fixed incomes are especially burdened by high housing costs, contributing to rising homelessness among Baby Boomers, The Wall Street Journal reports.
Driving the news: A surprising boost in rent prices fueled most of the increase in inflation in September, per the latest Consumer Price Index data.
The big picture: One in three Gen Z-ers (34%) surveyed by Freddie Mac say owning a home feels impossible in their lifetime, up from 27% in 2019.
- Saving for a down payment is the biggest obstacle, they say: It's one reason the typical first-time homebuyer last year was a record-high 36 years old, per the National Association of Realtors.
What's happening: Across the U.S., pinched young people are fanning out from big cities, returning to their childhood bedrooms or moving in with partners.
Zoom in: Watching mortgage rates inch closer to 8% "is one of the most disheartening things in my life," says Nicolette Serbus, 26, who tells Axios she and her partner have hoped to leave their one-bedroom apartment for about two years.
- The Minneapolis-area middle school teacher says 23% of her income goes toward her half of the rent.
In St. Petersburg, Fla., rent was growing faster than Gen Zer Alina Sharkey's income, so she got a new work certification to make commissions.
- "I had to find another way to make money," says Sharkey, who tells Axios she spends 33% of her income on rent.
Zoom out: America's housing shortage has helped hike the cost of both buying and renting.
Yes, but: The vast majority of young renters are renting for lifestyle reasons, preferring the flexibility to move, RealPage chief economist Jay Parsons tells Axios.
- Many Gen Z renters have lower incomes but also lower bills beyond rent, which allows them to live in pricier locations, according to Parsons.
Go deeper: Student loan interest has started again, adding to affordability pressures.
