There’s no question that young, prospective homebuyers have had an uphill battle to climb toward the American dream in recent years.
But is there something else standing in their way besides the economy?
The realities of stubborn mortgage rates, inflation, and the burden of student loan debt are undeniable. However, there is also a growing concern that young people have a more anxious relationship with money than generations before them. They aren’t alone.
According to a 2024 study conducted by Qualtrics on behalf of Intuit Credit Karma, 29% of Americans experience “money dysmorphia.” Money dysmorphia is defined as a distortion or unhealthy perception of one’s financial situation.
The study found that younger generations are more likely to report feelings of financial inadequacy (43% of Gen Z and 41% of millennials).
Owning a home is widely considered one of the most effective ways to build wealth. However, the question remains: Are first-time buyers genuinely blocked from making this key investment, or is perceived difficulty greater than the reality?
‘Money dysmorphia’ and the next generation
Money dysmorphia can wreak havoc not only on your peace of mind, but also on your financial planning, especially if you want to buy a home.
Feelings of financial inadequacy appear widespread, with the Qualtrics survey revealing that a majority of millennials (59%) and nearly half of Gen Z (48%) report feeling financially behind.
Though money dysmorphia has been a growing conversation since 2023, it is not a medical diagnosis.
“Money dysmorphia is not a clinical diagnosis but a term to describe distress from a distorted perception of one’s financial status that often does not match reality,” explains Han Lim Kim, licensed clinical psychologist at Clarity Therapy NYC.
Kim points to some of the common indicators:
Worrying about one’s finances, despite objective measures of steady income, savings, and best practices for financial health
Experiencing guilt and anxiety around spending, even when purchases are within one’s means and are reasonable
Having persistent thoughts that one’s financial status or trajectory is “wrong” or “behind” compared to others
“Behaviorally, one might repeatedly check their accounts or, conversely, completely avoid checking them,” she adds. “They may also be unable to spend meaningfully, feel stuck/indecisive, and cannot make financial decisions.”
Case in point: 37% of respondents in the survey who experience money dysmorphia reported having more than $10,000 in savings, with 23% of those having more than $30,000 in savings.
That’s well above the median amount of savings for Americans, which currently stands at $8,000 in transaction accounts, according to the Federal Reserve’s Survey of Consumer Finances.
Moreover, while those figures fall below the often sought-after 20% down payment on a median-priced home ($85,000 for a $425,000 home), depending on where you live and what kind of mortgage you qualify for, it is still a solid launching point.
The realities of Gen Z homeownership today
Experts argue that one reason for the increase in money dysmorphia among young people may be the influence of social media.
“Social media content, especially when consuming a specific, concentrated type, can definitely exacerbate dysmorphia fueled by external comparison,” explains Kim. “For example, seeing on social media that ‘everyone’ is flying first class, one could think that this luxury is much more common than they actually are, because they’re not seeing content of people flying economy or people who are flying economy may not be creating such content. This skewed benchmark can contribute to feelings of financial inadequacy.”
The same could be said about homeownership.
A recent Realtor.com® survey of 1,000 adults aged 18–27, who either own or aspire to own a home, revealed their most crucial factor when buying a home was finding a property at the “ideal price” (33%).
But for the oldest members of Gen Z, near 30, their homeownership rates lag behind most previous generations, albeit slightly higher than millennials’. This delay might be a consequence of waiting for what they perceive as the perfect price.
While fully understanding the financial burden of owning a home is a hurdle at any age, according to Cara Ameer, real estate broker at Coldwell Banker Vanguard Realty in Florida, she notices a lack of education about the market in a number of her Gen Z clients. And that lack of knowledge is doing them the disservice of not becoming a homeowner.
“They don’t know what they don’t know,” Ameer says. “They don’t understand the cost of waiting or that continuing to rent is not investing in themselves or helping make themselves rich versus a landlord.”
Looking to the future
With all that said, there’s solid evidence to suggest Gen Z is not only optimistic about homeownership despite entering the housing market during challenging times, but they are also well-prepared to own their own place—even if they don’t believe they are.
Two-thirds (67%) of respondents to the Realtor.com survey saw homeownership as an important lifetime goal, while 69% agree that real estate is an opportunity to generate wealth.
And astonishingly, more than half (51%) consider homeownership to still be part of the American dream.
Moreover, the survey found that Gen Z is smart about tackling affordability—they’re focusing on their careers, starting to save early, and planning things out.
In that case, perhaps the real definition of Gen Z buyer is not a dysmorphic one, but a cautious one.
“Ultimately, the distinction is in the appropriateness of concern,” explains Kim.
“A cautious buyer makes appropriate evaluations of risk with an objective understanding of their financial situation, whereas someone with money dysmorphia may experience heightened anxiety and distress, and their perceptions of risk and financial situation may be distorted.”
So, how do you know where you fall? The best way is to have a serious financial reality check.
First, take stock of your personal finances. Set your goals, track your spending, and set a budget you’re comfortable with. This is about setting goals for yourself, not comparing yourself to other people and where they are in their lives.
Next, dig into your relationship with money. When does your anxiety crop up? Is it after a big purchase? A trip to Starbucks? Thinking about retirement? Be honest about how the financial elements of your life make you feel.
Finally, seek guidance. Consult with a financial adviser for professional insight, and also talk with trusted friends and family about their financial strategies. Ultimately, prioritizing your financial well-being is a positive step for your mental health as well.
