With student debts, not much saving and social preferences to living with roommates, millennials are more likely to rent than own a home according to a recent report from Apartment List. The study shows a decreasing optimism about the prospect of homeownership among millennial renters.
The report found that 18.2 percent of millennials plan to rent forever in 2020. This number has increased over the past three years from 12.3 percent in 2019 and 10.7 percent in 2018.
But for MREX’s CEO Nikolaï Ray, millennials will change their minds in the upcoming years.
“If you ask those millennials in ten years from now, they will probably fall in line just like the generations before them,” he says.
Affordability: Biggest Roadblock for Millennials
After 2020 saw a rise in home prices and unemployment in the U.S., affordability has become the main roadblock for millennials from buying a home in the future.
The report from Apartment List finds out that, among the millennials who are always planning to rent, 74 percent of them say they cannot afford to buy a home, while 34 percent say they like the flexibility that renting provides. Thirty-two percent of the respondents say they prefer to avoid home maintenance and other costs, and 21 percent say buying a home is risky.
Even among those who plan to buy a home soon, 63 percent of millennial respondents report they have no down payment savings.
The report mentions that “over three-quarters of millennials say they are waiting until they have the financial means to buy a home, over three times the share who say they are waiting to settle down in a single place, or waiting to get married or to commit to homeownership with a life partner.”
The COVID-19 pandemic has also played a significant role in millennials’ plans for homeownership. According to the report, 21 percent of millennials are delaying homeownership altogether. For 67 percent of millennials, this delay results from a partial or total income loss, whereas 21 percent of millennials say it is because of a reduction of down payment savings or “a concern that homeownership is no longer a prudent decision in a volatile economy.”
Nowadays, millennials tend to delay marriage and kids and would instead share rent with roommates. That was different a few decades ago as baby boomers are today the nation’s highest homeownership with 78.8 percent compared to 47.9 percent for millennials, according to recent data from the Census Bureau’s Current Population Survey.
Also, according to the Apartment List’s report, millennials accounted for 38 percent of home purchases and more than half of all new mortgages in 2020. But they still lag behind older generations.
At age 30, 42 percent of millennials own homes compared to 48 percent of Gen Xers and 51 percent of boomers owned homes when they were the same age.
What Does That Mean for Multifamily Real Estate?
But, when those millennials stay renters forever, as they are saying, Ray explains this can be great for the multifamily real estate world.
“You are increasing the amount of demand for the same amount of supply,” he says. “The higher renter nation, the higher demand for rents, those rents can go up which is good for real estate investors, but you have to keep in mind that people will build more apartment buildings.”