Is America Officially a “Renter Nation”?

Is America Officially a “Renter Nation”?

Rising real-estate prices are stoking fears that homeownership is slipping out of reach for more and more Americans. Homeownership has long been considered a core component of the traditional “American Dream,” leading to an ingrained view that purchasing a home is a key marker of success. But is homeownership still as highly valued as it once was?

A recent survey from Apartment List shows that a majority of Americans do still feel that homeownership is an important goal, though attitudes vary by generation. When asked, “On a scale of 1-10, how important is homeownership for your own personal success?”, nearly two-in-three respondents rated the importance of homeownership at an eight or higher, while only one-in-ten gave a rating of three or less.[1]

Baby Boomers led the pack with 45% of respondents ranking the importance of homeownership as a ten out of ten, which was nearly twice as high as members of Gen Z (those born from 1997-2012). Granted, many members of Gen Z are still years away from actively pursuing homeownership, and so their attitudes may shift over time.

It is also worth noting that Millennials, who are now in their prime home-buying years, have more ambivalent views of homeownership’s importance compared to the generations that preceded them. These shifting generational attitudes are reflected in the homeownership numbers across the country.

After peaking at 69% in 2004, the homeownership rate fell every year until 2016, when it was 64.3%—its lowest level since the Census Bureau started keeping track in 1984. The rate rebounded in Donald Trump’s presidency, hitting 66% in 2020[2], but that trend is likely to be challenged by a housing market that is desperately short on supply and has seen home prices rise nearly 30% in the past two years.[3]

Indeed, Americans across all generations believe that homeownership woes will worsen over the next decade, with just 14% of the Apartment List survey respondents believing that it will be easier to purchase a home 10 years from now. Millennials, who are currently in the midst of navigating a historically tight housing market, held the most pessimistic view, which makes sense as nearly 63% of that 68 million cohort have saved $0 for a down payment.[4]

A nation of renters could lead to a world where location decisions are driven far more by personal preferences and lifecycle demands. Younger workers might prefer the excitement of the city. A couple just starting a family could reunite with their parents or siblings in a small town. A downsizing Baby Boomer could rent near their grown children. A homeowner in a declining area of the country who may have thought they couldn’t sell their home for nearly enough to buy a new place could instead opt to rent in a place with a more bustling economy.

The shift away from homeownership could be aided by the fact that slowly but surely, most Americans’ single biggest asset—their home—is becoming more liquid. What has been called the financializaton of the housing market, where housing is disconnected from its social function and becomes part of an investment strategy, has brought an increase of institutional investors into the housing market and changed the housing market forever.

As noted in a recent Bloomberg article, “Liquid assets, like publicly traded stocks and corporate bonds, earn what’s known as a liquidity premium: their market price is many times the dividend or coupon that investors get from holding them…houses have typically traded with very little liquidity premium. That meant a relatively low purchase price compared to what it would cost to rent—the equivalent of the dividend from housing investment—and stable prices over time.”2

The U.S. may not quite be a renter nation yet, but the seismic shifts currently underway make it seem likely that renter demand will continue long into the future.

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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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.

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[1] Apartmentlist.com, Generational Attitudes on Homeownership, March 14, 2022

[2] Bloomberg, America Should Become a Nation of Renters, June 17, 2021

[3] https://fred.stlouisfed.org/series/CSUSHPINSA

[4] RE Journals, Forever Renters? Nearly 20 Percent of Millennials not Interested in Owning a Home, February 18, 2021

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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.