Gen Z Is Investing Instead of Buying. Are They Right?

The Wall Street Journal ran a piece recently about Gen Z choosing stocks and crypto over saving for a down payment. Honestly, when you look at their situation, it is hard to blame them.

Home prices are 55% higher than they were in 2020. The median home in the U.S. is over $416,000. In California it is far more. Meanwhile, the S&P 500 has returned over 100% in that same period. If you are 24 years old watching your Robinhood portfolio outperform the housing market, the calculus starts to feel obvious.

Inspired by: The Wall Street Journal

The Case for Investing First

For a younger person locked out of homeownership by prices and rates, putting money to work in the market is not irrational. It is liquid: you can sell stocks, you cannot sell a bedroom. It is accessible: you can start with $50, you cannot buy a house with $50. Historically, the stock market has returned around 8% annually over the long run, which beats the effective yield on paying down a low-rate mortgage.

There is also a flexibility argument. Gen Z watched their parents and older siblings get locked into homes during the 2008 crash and the pandemic. They have seen how quickly "stable" real estate can become a trap. Some of them are choosing optionality on purpose.

The Tradeoffs Worth Knowing

That said, there are some things I would want any young person thinking this way to understand.

Home equity is forced savings. Every mortgage payment builds equity. It is not glamorous. It is, however, steady. Investing requires discipline; you have to actually leave the money in during downturns, not panic sell when the market drops 30%. A lot of people say they will stay the course and do not.

The wealth gap is real. Homeowners below the millionaire tier have an average net worth around $430,000. The average renter's net worth is about $10,000. A big part of that gap is home equity built over time. You can build wealth through investing. Doing so consistently for decades remains essential.

Crypto is a different conversation. Research shows Gen Z holds more crypto than retirement accounts. Crypto can go up dramatically. It can also go down 80% in a year. That is not a wealth-building strategy. That is speculation. Please do not confuse the two.

Waiting has a cost. If you are 25 today and plan to buy at 35, housing prices in California will almost certainly be higher in ten years. You can invest that down payment in the meantime. You are also racing against appreciation in the market you plan to enter, however.

What I Actually Think

I think the right answer for most young people in this market is: invest consistently in index funds, keep building your down payment savings separately and buy when the math works for your specific situation, not before but also not years later than necessary.

And if you are not sure where you stand, get a pre-approval. Knowing your real number takes about 30 minutes and costs nothing. A lot of people who think they are years away from buying are actually closer than they think.

Happy to help you figure it out.

Rates shown are for illustrative purposes only and are not a commitment to lend. Actual rates depend on credit profile, loan type, property type and market conditions. Not all borrowers will qualify.