The share of millennials that expect to rent forever has nearly doubled in two years, to nearly one-fifth, according to an annual report from Apartment List.
The rental listing site’s 2021 Millennial Homeownership Report found that, in 2020, 18.2 percent of millennials who don’t currently own homes expected to always rent, up from 12.3 percent in 2019 and 10.7 percent in 2018. Millennials are the largest generation and the report pegged their age range as 24 to 39. The report combined data from the U.S. Census Bureau’s Current Population Survey and Apartment List’s annual renter survey.
Despite stereotypes of millennials not wanting to be tied down, of those who plan to never purchase a home, 74 percent said affordability was the main reason — more than double the share who said they prefer the lifestyle benefits of renting such as increased flexibility and avoiding maintenance expenses, Apartment List said.
“2020 saw a rise in both unemployment and home prices, so it comes as no surprise that affordability remains the biggest roadblock to prospective millennial homebuyers,” wrote Rob Warnock, research associate at Apartment List, in the report.
“To shield the housing market from a volatile economy, interest rates were dropped to near-record lows this year. This makes it easier to finance a home, but only for those who can afford the upfront cost of a down payment. And many millennial renters cannot.
“And despite a bullish housing market that has seen prices rise for over a decade, some millennial renters whose young adult years were mired by the Great Recession remain skeptical; 21 percent of committed renters say that buying a home is financially riskier than renting one.”
Of the more than 80 percent of millennials who do plan to buy a home in the future, more than three-quarters are waiting until they have the financial means, according to the report. That’s more than three times the share that said they’re waiting to settle down in one place or waiting to get married or commit to homeownership with a life partner, the report said.
“[F]or a significant share (40 percent), the COVID-19 pandemic has had a direct effect on their homeownership plans, including 21 percent who are now delaying homeownership altogether,” Warnock wrote.
“For most, this delay is driven purely by economics: a result of partial or total income loss (67 percent), a reduction of down payment savings (21 percent), or a concern that homeownership is no longer a prudent decision in a volatile economy.”
Of those who want to buy, 63 percent don’t have any dedicated down payment funds set aside and just 15 percent have saved more than $10,000.
“While it is true that lenders tend to be more lenient in their down payment requirement for first-time home buyers, the up-front costs of homeownership remain a massive roadblock for many renters,” Warnock wrote.
“62 percent said the down payment is a reason they are waiting, compared to just 31 percent who cited recurring monthly payments.”
In order to buy, some millennials are expecting help from their parents, while others may have to make big lifestyle changes, according to the report.
“In this year’s survey, over 20 percent said they are expecting down payment assistance from family, highlighting how wealth in one generation can affect wealth in the next,” Warnock wrote. “But for the remaining 80 percent, homeownership may be realistic only if their personal savings increase dramatically and/or they narrow their search to some of the nation’s most affordable markets.”
Millennials accounted for 38 percent of home purchases in 2020 and more than half of all new mortgages, but they lag behind previous generations when it comes to homeownership, according to the report. At age 30, 42 percent of millennials own homes, compared to 48 percent of Gen Xers and 51 percent of boomers when they were the same age, the report said.
According to Census Bureau data, the 2020 millennial homeownership rate was 47.9 percent, while for Generation X (those aged 40 to 55) it was 69.1 percent and for boomers it was 78.8 percent — “higher than ever before,” the report said.
“Though the millennial homeownership rate is rising, we find that a generational homeownership gap persists and the impacts of the ongoing COVID-19 pandemic are likely to reinforce the trend in years to come,” Warnock wrote.
The homeownership disparities are particularly acute by race.
“White millennials maintain a homeownership rate that is substantially higher than non-white groups, and only barely lower than previous generations,” Warnock wrote.
“Hispanic and Asian homeownership trails well behind, despite not having significant gaps between generations. But for Black Americans, not only is homeownership lower than the rest, millennials face the largest generational divide. By age 30, the white millennial homeownership rate (51 percent) is already 2.5x higher than the rate for Black millennials (20 percent).”
Still, millennials of color were more optimistic than their white peers in regards to homeownership. While 20 percent of white millennials in 2020 expected to rent forever, 17 percent of Blacks and Asians and 14 percent of Hispanics expected to rent forever.
The COVID-19 pandemic and attendant recession will have an impact for the generation coming up, Gen Z, according to the report. Even at age 23 or younger the share that expect to rent forever is already at 18 percent.
“[T]he economic inequalities that contribute to low millennial homeownership are strengthening, not weakening,” Warnock wrote. “One thing that remains to be seen is the extent to which remote, decentralized working arrangements prevail in a post-COVID economy. This may provide Gen Z a unique opportunity to access good jobs and affordable homes at the same time, even if the two exist physically in different places.”