Housing Market Challenges Intensify And Expert Warns, 'If You're A Parent Of Gen Z Kids, Get Used To Them Living In Your House For A While'

The path to homeownership is proving more difficult for first-time buyers as mortgage rates and other associated costs soar. 

Mitch Roschelle, managing director at Madison Ventures+, described the timing as the worst of the year, with mortgage rates reaching their highest since last November. He conveyed his concerns during an interview on Fox Business's' "Varney & Co."

The average rate for a 30-year fixed mortgage is 7.375%. Roschelle anticipates an increase in these rates, compounding the difficulties for new entrants into the housing market. He highlighted additional financial burdens, such as rising property taxes and insurance costs, which are inflating the overall expense of homeownership.

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Rising costs aren’t just a burden for renters. Landlords are facing a similar squeeze. Property taxes and insurance premiums are on the rise, eating into their profit margins. To keep up with these increasing expenses, many landlords raising rents. This creates a ripple effect, as tenants must adjust their budgets to cover the higher housing costs. 

"Consequently, rents are climbing," Roschelle said.

He referred to the situation as a "price spiral," with rent increases surpassing 5% annually. This trend, according to Roschelle, could force many young adults to delay their plans of moving out, especially those belonging to Generation Z. 

"I think if you're a parent of Gen Z kids, get used to them living in your house for a while because the prospects of them moving out look pretty grim," he said. 

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A recent study from the Pew Research Center reveals that less than half (45%) of adults ages 18 to 34 consider themselves financially independent. A quick look at the current economy helps explain this situation. Nearly a third of young adults in the 18- to 34-year-old demographic live with at least one parent. This percentage increases for those ages 18 to 24, with 57% still living at home. The traditional “sink or swim at 18” mentality has largely shifted because of new economic realities. Echoing this trend, a Wharton School from the University of Pennsylvania report using census data indicates that nearly half of Americans ages 18 to 29 lived with their parents, the highest level since the Great Depression.

Despite gloomy market conditions, Roschelle remains optimistic about real estate investment, emphasizing that property values are likely to rise. He advises potential buyers to recalibrate their expectations concerning the ongoing costs associated with higher interest rates and the overall expense of maintaining a home.

This advice comes amid reports indicating that housing affordability has plummeted to its lowest level in 40 years, emphasizing the severity of the current real estate climate. 

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