Are Millennials Giving Up on Homeownership?

Are Millennials Giving Up on Homeownership?

It has been said that “As Millennials go, so goes the nation.” Given that this generation is America’s largest at over 75 million strong, it makes sense that what they often set the tone for much of the country’s social, economic and political direction.

As it pertains to homeownership, the most recent Census data shows that the Millennial homeownership rate stands at 48.6%, more than 20 percentage points lower than the rate for Gen X and almost 30 percentage points lower than Baby Boomers.

While it isn’t surprising that Millennials in their 20s and 30s would have a lower homeownership rate than Boomers in their 50s and 60s, recent data shows that even when controlling for age, Millennial homeownership continues to trail previous generations.

Among the oldest batch of millennials who reached age 40 in 2021, the homeownership rate is 60%. In comparison, 64% of Gen Xers, 68% of Baby Boomers, and 73% of Silents owned homes when they were the same age.[1]

Many younger American adults may have a cautious sixth sense about the future, precisely because they witnessed the last housing run-up and subsequent financial crisis demolish their parents’ home value. An ongoing Apartment List renter survey has been monitoring home-buying sentiment among Millennials since 2018, and found that over the past four years, the percentage of Millennial renters who plan to “always rent” instead of buy has increased from 13.3% to 24.7%.[2]

Given the high cost of houses and the associated mortgage burden, along with the inherent inflexibility that homeownership places on the ability to utilize physical mobility in an effort to improve economic mobility, home ownership appears to be viewed by many younger Americans as a liability rather than an asset.

Renting also offers certain lifestyle benefits over homeownership. Not only do renters have more flexibility to move where and when they want; they are free from the responsibilities (and unexpected costs) of homeownership, and can live in more amenity-rich communities than homeowners. As institutional investors have taken note of the Millennial desire to “have their cake and eat it too,” we have seen the emergence of “built for rent” single-family or paired villa communities that aim to deliver the detached home experience in a more amenitized, “community-focused” setting.

Beyond Millennials, the pandemic has shown to be a defining economic moment for the following Gen Z. Currently ages 24 and younger, Gen Z renters have been thrust into a housing market that immediately jumped in price. The coming years will reveal how Gen Z fares compared to Millennials, but according to the Apartment List survey, many of today’s youngest adults are resolved to rent for the long term.2

What impact might all of this have on the rental market? It might provide a nice boost as Millennials and Gen Z continue renting later in life when compared to their peers from previous generations. For apartment owners interested in riding the renter nation wave, but who are ready to retire from being a landlord, there are passive real estate investments that may allow investors an ability to move from an active to a passive role of real estate ownership on a tax-deferred basis.

For more information about passive real estate investments, please call 1031 Capital Solutions at 1-800-445-5908 or visit our website, 1031capitalsolutions.com.

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This is for informational purposes only, does not constitute as investment advice, and is not legal or tax advice. Because investors situations and objectives vary this information is not intended to indicate suitability for any particular investor. Please consult the appropriate professional regarding your individual circumstance. This material is not to be interpreted as tax or legal advice.

The views of this material are those solely of the author and do not necessarily represent the views of their affiliates.

Statements concerning financial market trends are based on current market conditions, which will fluctuate.

The data contained in this material was obtained from third-party sources believed to be reliable; however, 1031 Capital Solutions, CIS, and CAM do not guarantee the accuracy of the information.

Securities offered through Concorde Investment Services, LLC (CIS), member FINRA/SIPC. Advisory services offered through Concorde Asset Management, LLC (CAM), an SEC-registered investment adviser. 1031 Capital Solutions is independent of CIS and CAM.

[1] Current Population Survey, Annual Social and Economic Supplement, 1976-2021

[2] ApartmentList.com, Apartment List’s 2022 Millennial Homeownership Report, April 21, 2022

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Securities offered through Concorde Investment Services, LLC (CIS), member FINRA/SIPC. Advisory services offered through Concorde Asset Management, LLC (CAM), an SEC registered investment adviser. Insurance products offered through Concorde Insurance Agency, Inc. (CIA) 1031 Capital Solutions is independent of CIS, CAM and CIA.

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