With millennials and Gen Z facing record-high housing costs, crushing debt, and tight lending rules, the dream of homeownership has never felt more out of reach.
Combine lofty mortgage rates, market uncertainty and a historic housing shortage, and the odds seem stacked against young buyers.
But according to real estate expert Freddie Smith, there’s still hope. The TikTok influencer recently unveiled five scenarios that could help millennials and Gen Z “unlock” the homeownership dream many have stowed away.
From taking the plunge and relocating to a more affordable area, to saving up for a massive down payment, prospective buyers may have a few windows of opportunity to step into their first home.
Here’s how millennials and Gen Z could finally get their foot in the door.
MILLENNIALS AND ZOOMERS AREN’T LEAVING THE NEST ANYTIME SOON. THIS REALTOR SAYS THAT’S A SMART DECISION
1. Get A Co-Signer
For those struggling to qualify for a mortgage, getting a co-signer – such as a parent or close relative – can be a game-changer. In an interview with Fox News Digital, Smith emphasized that financial stability and responsibility are key factors in making this strategy work.
“If you do have the income, that’s great. If you can increase your income, if you do have your life together, and you’re financially responsible, and you’re doing all the right things, and you have a loving family member who can [co-sign], you can put that relationship together and co-sign to get you into a house,” Smith explained.
However, co-signing comes with risks, and would-be homeowners should carefully weigh those risks verus potential rewards.
“There’s some dangers in that [co-signing]. Family would have to really discuss and make sure that that’s going to work,” he added.
2. Market Crash
According to Smith, a 30% market crash that brings the average home price down to $300,000 could create a window of opportunity for households bringing in $85,000 a year to afford a home that would otherwise be out of reach. In other words, taking a wait-and-see approach might just be the best option.
Smith shared the advice on TikTok, where he makes videos about real estate and the economy and helps educate people on how to get ahead.
But, of course, the timing of the market is unpredictable, and, while a downturn could lead to more affordable options, there’s no guarantee of when – or if – it could happen.
3. Lower Interest Rates
High interest rates are among the biggest hurdles to affordability for many prospective homebuyers. Lower rates could relieve the monthly cost burden, making middle-income earners viable candidates to own a home.
“If interest rates go down to 4%, this would bring your payment to around $2,800 a month, and then someone making $85,000 would have a shot at qualifying,” Smith explained on his TikTok account last week, in reference to purchasing a home around the national average price of $420,000.
But waiting for rates to drop is a gamble. Interest rates are influenced by Federal Reserve policy, inflation and broader economic conditions, making it difficult to accurately predict when the next decline could come.
4. Make A Massive Down Payment
If you want to sidestep sky-high mortgage rates, shrink your loan and improve your approval odds, a massive down payment could be your golden ticket.
“Being able to have a larger down payment will lower the amount of loan that you need, which would help you, on a lower income, qualify… So that’s another option,” Smith told Fox News Digital.
But where does that kind of cash come from?
For some, the answer lies in multigenerational living – sticking it out at home with parents, grandparents or other close family members to funnel money into savings and divide up living expenses.
Others are teaming up with trusted friends to co-own property, pooling resources to crack the code on homeownership together, so when the time comes to level up to a more traditional home, they might have the option to pay a greater lump sum up front.
For those willing to ditch the idea of a traditional home – at least for a little while – some with lighter budgets are even opting for mobile or tiny homes to satisfy their itch to own their own space without immediately signing up for a lifetime of mortgage-related stress.
“I think you’re going to have to move and use alternatives, like a duplex, [a] multigenerational family in one home, maybe going in with your friends if you’re really close, and you trust each other and have the same financial goals, and you could do something there,” Smith pointed out.
“Cosigner, bigger down payment… there’s many strategies, but it’s very nuanced depending on the person.”
5. Relocate
Cities are notorious for sky-high living costs, so packing up and moving to a quaint spot in rural America might be in the cards for some would-be homebuyers.
“The south has a lot of affordability, and the Midwest,” Smith mentioned.
Rural spots in states like Missouri, Iowa, Indiana, Ohio, Tennessee, Alabama and many of their neighbors are good spaces to consider resettling, but making the move can come at a cost.
“There’s not much job opportunity there – that’s the kicker,” he pointed out.
“If you’re living in a big city making $120,000, then you move to Ohio for a cheaper home, but now your income goes down to $50,000, now you’re in the same boat, so you have to try again to balance that.”
Smith predicts that many zoomers and some millennials will start migrating out of major cities, putting their stock in tiny homes or simply moving to more affordable towns.
“I think that’s going to be the only viable option for many people. It’s a little scary. We’re not ready for it yet, but I really don’t see an option in the next three to five years where we won’t see a huge surplus of people moving to small, cool, hip towns.”
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