Over the past year, more than a million additional millennials gave up on planning to buy a home and resigned themselves to renting for the foreseeable future, and perhaps the rest of their lives.
A new study provides the first hard evidence that large numbers of millennials who would like to become homeowners are so frustrated with soaring home prices and meager supplies that they have changed their minds, at least for now.
The survey, by the Apartment List website, found that 12.3 percent of millennials plan to rent for the foreseeable future, up from 10.7 percent just one year ago.
The study defines millennials as those between the ages of 23 to 38. Depending on which age brackets demographers use, the number of millennials in the United States hovers around 80 million.
Apartment List, which has tracked millennial rental trends for five years, also found that 48 percent of millennials haven’t saved anything to go toward a down payment. According to the study, at current savings rates, only a quarter of millennial renters will be able to afford a 10 percent down payment on a median-priced home in the next five years.
Millennials who are expecting financial support from their families are finding that, but support from the “bank of mom and dad” is declining. In every major metropolitan area covered by the survey, fewer than half of aspiring millennial homeowners will be financially ready in the next five years, even at just five percent down.
The Apartment List survey echoes a June Freddie Mac survey, which found that a record 82 percent of renters now believe renting is more affordable than owning, up from 67 percent just a year ago. Freddie Mac found that a quarter of older millennials (ages 23 to 38) who are renting today believe it is not very likely or not at all likely that they will buy in the future.
More than a year ago, the Urban Institute estimated that more than 19 million millennials in 31 cities are “mortgage ready,” with credit scores and debt levels good enough to qualify for a loan. Most are still renting.
“I think there is a feeling that we are getting close to the end of the economic expansion and many millennials may not feel that these are good times. After the longest expansion in US history, this should be the time when millennials should be feeling most comfortable, but they turn on the news and hear economists talking about a recession that might happen next year or the year after that. Through that lens, it’s understandable how there might be a cohort that thinks that homeownership isn’t in the cards for me,” said Apartment List’s Chief Economist Igor Popov, who thinks the ranks of “renters forever” will continue to rise.
Not so long ago, in the dark days following the housing crash, which cost four to six million families their homes, some forecasters predicted a “rentership” society would replace America’s love affair with home ownership. With faith in the security of the home investment shaken by the crash, the idea was that families would forgo home ownership for the mobility and ease of renting. They’d then invest the money they might have spent on a house on other investments.
That didn’t happen. “We’ve done other surveys where 89 percent of millennials think homeownership is important for personal success and financial success” Popov said. “I continue to be almost surprised by how bullish millennials are on the financial benefits of homeownership. I think home ownership is still a goal on the horizon for millennials. At a different time, we’ll see whether Gen Z either doubles down on home ownership or starts to do more nuanced things like embracing co-owner living and things like that.”
Steve Cook is a communications consultant and editor of Real Estate Economy Watch.