Is Gen Z’s Debt Preventing Homeownership?

Older members of Gen Z are now reaching adulthood, but the average age of first-time homebuyers reached a record-high of 38 last year. What’s holding Gen Z back? For many, it might be debt. 

Of all generations, Gen Z has the highest average personal debt of $94,102, according to research from Newsweek. Although approximately 32% of Gen Zers have no debt, 43% owe up to $100,000. 

In comparison, their older generational cohorts have average debts of: 

• Millennials: $59,181 
• Gen X: $53,255 
• Baby boomers: $36,145

For Gen Z, the majority of their debt comes from credit cards, followed by student loans and personal loans. The breakdown of their debt is: 

• Credit card: 56% 
• Student loan: 31% 
• Personal loan: 23% 
• Medical: 19% 
• Mortgage: 16% 
• Auto loan: 10% 

Gen Z’s high credit card debt may be a result of rising student loan burdens, increasing costs of basic living and growing inflation, as well as a lack of general financial education. 

So, is debt a dealbreaker when it comes to homebuying? 

Having high amounts of debt can trap Gen Zers and other individuals, delaying financial milestones like homeownership. But Realtor.com emphasizes that the ratio of debt is what matters. 

“The debt-to-income (DTI) ratio measures how much of your monthly income goes toward debt payments, helping lenders assess whether you can afford a mortgage,” Realtor.com says. “It’s calculated by dividing your total monthly debt payments by your gross monthly income and multiplying by 100.” 

Lenders generally prefer a DTI of 36% or lower, with 28% to 35% allocated to housing costs. However, the ratio can vary by lender.