Gen Z can't afford the American Dream—so they've traded homeownership for paying off debt

Gen Zers are having a difficult time buying a house because of the increasing costs of homeownership—and because many are drowning in debt related to student loans, credit cards, and buy-now, pay-later arrangements. Just 3% of homeowners in the U.S. are Gen Zers, according to the National Association of Realtors.

Buying a house has long been the American Dream. It’s a sign of financial stability and is often considered one of the ultimate investments one can make.

But finding that white picket fence is out of reach for most Gen Zers, who are now saddled with paying off personal debt, and it’s making that generation fall behind in homeownership, according to Realtor.com.

Young people just want to pay off their debt, according to a report by payments-data provider Pymnts Intelligence. On average, Gen Zers carry more than $94,000 in personal debt, a Newsweek poll shows, which far surpasses millennials with almost $60,000 in debt and Gen X with about $53,000 in debt. Part of the struggle is a result of how much Gen Zers are paying for rent each month, leaving little to save for a down payment.

About one-third of Gen Zers say they’re financially underwater due to inflation, high interest rates, and stagnant wages, Natalia Brown, chief compliance and consumer affairs officer with National Debt Relief, told Fortune.

“Many [Gen Zers] are entering adulthood with a heavy financial burden—student loans, credit card debt, and rising costs of living,” Brown said. “Their debt feels heavier because it hits earlier—right as they’re launching their careers.

“Add in credit cards, medical bills, and buy-now, pay-later services, and the result is a dangerous snowball effect,” she added.

The real cost of homeownership

According to the National Association of Realtors (NAR), Gen Zers make up just 3% of all homebuyers. That may not be that surprising considering mortgage rates continue to be comparatively high, nearing 7%.

Meanwhile, U.S. home prices have far outpaced wages, according to the Joint Center for Housing Studies of Harvard University. The median home price in the U.S. is more than $403,000, NAR data shows, while the Social Security Administration reports the national average wage index is about $66,600.

Assuming today’s mortgage rate, a 20% down payment, and the national average salary, it would be essentially impossible to purchase a median-priced home without spending more than one-third of your monthly income on housing.

Nikki Beauchamp, an associate broker with Sotheby’s International Realty in New York City, said high interest rates are a major factor preventing Gen Zers from buying real estate.

“The cost of homes is substantially higher than it was for previous generations, and you may not see as many starter homes being built or becoming available,” Beauchamp told Fortune. “Add to that the student loan debt, and in general, it has been my observation that as a result they have much higher debt than my generation [Gen X] did at that age.”

Advice for Gen Zers who want to own a home

While mounting debt can feel overwhelming and homeownership out of reach, there are ways to organize how you’re paying off your debt.

Financial advisors suggest paying off high-interest debt like credit cards first, since many of them carry a rate above 25%, which can make it feel nearly impossible to pay off. It can be easier to budget around other debt like student loans and car payments, Elizabeth Schleifer, a financial advisor with Armstrong, Fleming & Moore, told Fortune, adding a good rule of thumb is that total monthly debt payments should be less than 36% of gross monthly income.

“Look at your existing debt and determine how much room, if any, there is for a mortgage payment,” Schleifer said. “If your debt levels are already too high, your only focus should be paying these down.”

Advisors also recommended that Gen Z avoid buy-now, pay-later services as much as possible because they can lead to a “trap of small, repeated purchases that add up,” Brown said.

Beauchamp also reminds Gen Zers there are several other ways to break into the housing market aside from traditional ownership.

“Real estate has many different permutations, including co-ownership, fractional ownership, that might be intriguing for those looking to start to get on the ladder of property ownership,” she said.

A version of this story was originally published on Fortune.com on June 11, 2025.