Is Your Mind An Obstacle? How ‘Money Dysmorphia’ Can Be a Real Hurdle for First-Time Buyers

There’s no doubt that young, potential homebuyers have had an uphill battle to get into the American dream in recent years.

But is there anything stopping them other than the economy?

The hard facts of housing prices, inflation, and the burden of student loan debt are undeniable. However, there is growing concern that young people have a more anxious relationship with money than the generations before them. They are not 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 incorrect 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 truly prevented from making this important investment, or is the perception more difficult than 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 deprivation appear to be prevalent, as a Qualtrics survey reveals that the majority of millennials (59%) and half of Gen Z (48%) report feeling financially behind.

Although money dysmorphia has been a growing discussion since 2023, it is not a medical diagnosis.

“Money dysmorphia is not a clinical disease but it is a term that describes depression caused by a distorted view of a person’s financial situation that often does not match the facts,” he explained. Han Lim Kimis a licensed psychotherapist at Clarity Therapy NYC.

Kim points out some common indicators:

• Worrying about one’s finances, despite specific measures for a solid income, savings, and financial health best practices
• Feeling guilty and anxious about spending, even if the purchase is within your means and makes sense
• Having persistent thoughts that one’s financial situation or trajectory is “bad” or “behind” compared to others.

“Ethically, a person may repeatedly check their accounts or, conversely, avoid checking them altogether,” he adds. “They may also be unable to spend money meaningfully, feel stuck/indecisive, and unable to make financial decisions.”

Case in point: 37% of survey respondents experiencing money dysmorphia reported having more than $10,000 in savings, and 23% of those had more than $30,000 in savings.

That’s far more than the average amount Americans save, currently about $8,000 in checking accounts, according to the Federal Reserve’s Survey of Consumer Finances.

Furthermore, while those figures fall below the 20% down payment typically required on a median-priced home ($85,000 for a $425,000 home), depending on where you live and what type of loan you qualify for, it’s still a solid starting point.

Gen Z homeownership facts today

Experts argue that another reason for the increase in money dysmorphia among young people may be the influence of social media.

“Content on social media, especially if it feeds on a specific, focused type, can exacerbate dysmorphia that is fueled by external comparisons,” explains Kim. “For example, seeing on social media that ‘everyone’ flies first class, one might think that this luxury is more common than it really is, because they don’t see the content of people who fly economy or people who fly economy may not create such content. This skewed measurement can contribute to feelings of financial inadequacy.”

The same can be said about owning a home.

A recent Realtor.com® survey of 1,000 adults ages 18-27, who own or aspire to own a home, revealed their top priority when buying a home is finding a property at the “right price” (33%).

But for the oldest members of Gen Z, approaching 30, their homeownership rates lag behind many previous generations, although they are slightly higher than millennials’. This delay may be the result of waiting for what they see as the absolute value.

Although fully understanding the financial burden of owning a home is a barrier at any age, according to Dear Ameerreal estate agent at Coldwell Banker Vanguard Realty in Florida, notices a lack of education about the market among many of his Gen Z clients. And that lack of knowledge is hurting them from not owning a home.

“They don’t know what they don’t know,” said Ameer. “They don’t understand the cost of waiting or that continuing to rent doesn’t invest them or help them get rich compared to the landlord.”

Looking to the future

With that said, there’s strong evidence to suggest that Gen Z is not only optimistic about homeownership despite entering the housing market during tough times, but they’re also well-prepared to own their own property—even if they don’t believe it.

Two-thirds (67%) of respondents to a Realtor.com survey saw homeownership as an important lifelong goal, while 69% agreed that real estate is a wealth-generating opportunity.

And surprisingly, more than half (51%) consider home ownership part of the American dream.

In addition, the survey found that Gen Z is smart about affordability—they focus on their careers, start saving early, and organize things.

If so, perhaps the true definition of the Gen Z consumer is not dysmorphic, but intelligent.

“Ultimately, the difference is worth worrying about,” Kim explained.

“A prudent consumer makes an appropriate assessment of risk with an objective understanding of their financial situation, while a person with money dysmorphia may experience severe anxiety and depression, and their perceptions of risk and financial situation may be distorted.”

So, how do you know when you’ve fallen? The best way is to have a serious financial check.

First, look at 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 start? Is it after a big purchase? A trip to Starbucks? Thinking about retirement? Be honest about how the financial aspects of your life make you feel.

Finally, seek guidance. Consult a financial advisor for professional insight, and talk to trusted friends and family about their financial strategies. Ultimately, prioritizing your financial well-being is a good move for your mental health as well.