Appraiser · Denver, CO · Member since 2018 · 40 posts · 58 votes
As many of us are aware, millennials are more apt to renting rather than buying real estate. They (we?) are replacing baby boomers at a rapid rate, and are right behind Generation Z... Of course, Generation Z still has a while to develop before they are able to buy real estate or rent, so in the very near future, Millennials are going to be the largest generational demographic.
From CNBC: "The homeownership rate among millennials ages 25 to 34 is around 8 percentage points lower than Gen Xers and baby boomers was in the same age group."
The Urban Institute did a study and reported that Millennials getting married later and less often plays a major role, as well as Millennials typically deciding to rent in higher income areas instead of the poorer areas. High rent + single incomes + median credit score of 640 = less homeownership.
As investors, does this information change your perspective on investing? Or have you implemented a plan to adapt and flow with the changing real estate market?
As a whole, to the more experienced and economics-minded investors, could lower homeownership lead to more instability in the market?
As @J Scott likes to say, there are always ways to capitalize on changes in the real estate market... What are your methods?
Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes
7y
Millenial home ownership rate is 8% below generation X. Hardly a big delta considering that most 22 year olds dont own homes. Oh, and once they hit age 35....there homeownership rate jumps to match gen Xs.
Homeownership rates have not drastically changed in almost 100 years. People make a big deal out of things like 2006 being the highest rate or earlier in this decade being the lowest rate...but we are talking about a range of 62% to 68%. So you take the long term average of around 65/66% and the highest and lowest rates have only been a couple percent above and below the long term average.
Is there an economic impact in that couple percent change? Sure. Is it materially significant? Unlikely. More so its good for the media to get clicks or views than anything else.
Remember, there are lies....there are dmaned lies, and then there are statistics. Stats like millenials having low home ownership rates sounds really interesting until you put it in perspective.
Most of those we rent to can't wait to buy their own homes but are saddled with student debt, auto leasing & must have Caribbean vacations.
Then again some simply prefer to move to the hot downtown, minimal street parking, high rent smaller units/$ areas to be close to the $15 martini 'action'. It's an addictive catch-22 as they then try to buy into the same must have area. Those that do soon discover the idiosyncrasies of mid-1900's homes that become money pit vacuums.
Rental Property Investor · Fort Collins, CO · Member since 2015 · 128 posts · 327 votes
7y
There are a few trends at play.
One is that many millennials bought into the "everyone should go to college" + "do what you love" trap, leading to student debt. Even for those that manage to survive it, the money that would have been a down payment is now a loan payment, leaving our 30-year-old millennial without savings.
Another is the YOLO-travel-experiences mindset, which has replaced career advancement and wealth acquisition as the "American Dream." Status is measured in likes, not dollars. There's even an anti-wealth sentiment among many, who portray it as "consumerism" or anti-environmental. Millennials came of age under Obama and lean more left than other generations.
Finally, there's the job model. People change jobs and move more frequently, and owning a residence does NOT make sense if you're not staying long (unless you'll retain it as a rental).
Keep in mind with all of these that while knowing what the majority are doing is important, there are always exceptions.
Understanding the net impact of all of this on investors is difficult. While I tend to believe that millennials will NOT start to act more like previous generations as they age (their values are different, for better or for worse), the impact of fewer buyers and more renters in the market cuts both ways. Rents should go up due to demand, but anti-landlord legislation could also increase. Values could go down due to lack of purchase demand.
Ultimately, I believe that local market analysis is more important than these ultra-broad conversations in your investing strategy.
Westchester, NY · Member since 2018 · 11 posts · 2 votes
7y
I read a 2017 census report that underscored that millennials are not buying homes and prefer to rent in or near trendy down town locations, but plan to buy later in life. The report stated that one reason is that they want to remain flexible to upgrading job opportunities and want to be able to move relativity quickly. However, the same report stated that generation Z'ers, are looking to put down root and purchase their first home after high school/college.
Investor · Cincinnati, OH · Member since 2016 · 208 posts · 157 votes
7y
I'd like to admit, "I too, am a millennial." I'm 28. Most of my friends that are homeowners are married.... most of my single friends are renters. That is an oversimplification, but the only reason I am a homeowner is because I invest..... I only buy houses to live in so I can rent them out after I move on...... I too would rent if I didn't know the benefits of investing in rental properties.
As has been mentioned, most of my friends that are millennial's prefer to have the flexibility of being a renter.... want to take a job in another city, great, a lease is preferable to a mortgage. Want to leave your corporate job for a passion project where you'll initially make less $, being a renter is a better situation, etc...... I think it's awesome that many millennials are upending the status quo of working 9-5 at solid company for the entire lives, instead, choosing to pursue a passion and starting a business of their own.... renting simply makes that more possible.
In my friend group, nearly all who rent could afford to buy.... renting simply fits their lifestyle better at this point in time....I think that's an important distinction.... it's not that millennials can't purchase a home.... it's that they choose not to.
I agree with Jay that boomers are retiring and downsizing and also that millennials are waiting.
First to the new boomer market - I was born at the end of the baby boomer generation. My sibs and I went through caring for our parents in the home they raised us in through their decline. They were the first owners of a classic split level home, and full of 50 years of memories. It was important to them to remain there. We pitched in and made it happen, but we saw first hand that it was not really conducive to accommodating their changing mobility needs. We all decided that we do not want to repeat this with the next generation. We want to be in the driver's seat and make a change now, prior to our health changing. Though not purchasing quite yet, we are all evaluating options, making sure our next homes will be accessible - no stairs, wider doorways, elevators (if we select to purchase in a larger multi-unit building), with shops and healthcare nearby, etc. It is important to us that we maintain our independence better (and hopefully longer) than our parents. I believe the aging boomer market is just starting to mushroom.
I also agree that millennials will be a big market, when is the only question. I have a multi-unit building on Chicago's north side, with nearby restaurants, boutiques, convenient mass transit, and easy highway access nearby. Millennials who rent from me, as well as others I have spoken to in the neighborhood consistently express the YOLO attitude. By not purchasing properties yet, they can enjoy a good lifestyle right now. By both delaying starting a family and continuing to rent, they can do more, travel more, and even pay down student debt quicker.
So what else are millennials doing prior to purchasing? Consistent with YOLO, they also seek personal fulfillment and want to make a difference in the world. Many I have spoken with are reworking their career, sometimes with an eye on advancing their prospects in their chosen fields, other times shifting into entirely new careers. I have to agree with them that it is harder to make a big career change when you are responsible for a big mortgage and have several mouths to feed.
Now the good news - though not a crystal ball by any stretch of the imagination, many millennials have shared that they expect to purchase in their mid to late 30s. If true, the millennials (born between 1981 - 1996) are now 23 - 38, and the shift to purchase is already afoot.
Real Estate Professional · Brentwood CA / Dallas, TX · Member since 2016 · 185 posts · 146 votes
7y
A lot of this is market dependent. I am smack in the middle of the millennial age range (33). I live in one of the hottest markets in the country (Bay Area). Once married I scraped all our pennies together to save for a 3.5% FHA down payment since I knew rates were crazy low. We sold that house 2 years later and tripled our initial investment without touching anything on the house. Also, renting is extremely expensive here but our mortgage is about even with what a comparable rent would be. I may as well pay rent to the bank and buy down some equity while getting some great appreciation.
Many of my friends (myself included) purchased homes once we got married. It's almost a requirement because of cost, buying here on one income is difficult unless you are making well over $100K.
Contractor · San Diego, CA · Member since 2018 · 432 posts · 221 votes
7y
@Tyler Erickson owning a home is just cool! That’s not going to go away. Owning your own little pad, yard, space! It’s like flannels, they were really big in the 80’s but I still wear them! I think we’re all interpreting that people are getting “stupider” and make less responsible choices, and the country is moving toward a slave to the rich scenario until there’s mass gang destruction to properties.. hmm.. could be, but I plan and hope for the best, hoping that most (not for all) will get married, start a family, and have their own space for their kids to play in their own yard. Maybe it’s not headed that way, but I wouldn’t be excited about young people not marrying, not owning anything, and essentially moving with the masses to Austin where Grant Cardone runs the plantation. Or maybe it’s best to keep the masses in the Cardone camps and the free can own the country! However you look at it, I like do invest in houses and make them something nice that someone can live in and enjoy their yard and privacy, and not have the stress of the weed smoke coming through the ducts, or the stomping guy on top of them or the dangerous dogs that every walks around the complexes. So what if it has a swimming pool where the creepers go!?
Real Estate Entrepreneur / Investor · Chicago, IL · Member since 2016 · 688 posts · 367 votes
7y
buying homes?????Nahhhhh we dont do that. The thing to do is go to college and rack up debt. Not having a clue what we plan to do after we graduate. "We are going with the flow" In the meantime we are in college we are getting accustom to the "turn up" lifestyle gotta always go out every weekend and party right? This is afterall the thing to do in society right now...^__^ smoke and drink so much we arent able to function the next day. Then spend the next day sleeping/recovering from the night before.
Once we graduate we complain about the lack of jobs and how life sucks. In the meantime we are living with either family or friends or we are renting in one of the trendy areas of the city. ^__^ we have to always be in the know....ya know? Cant miss out on any event or concert that goes on.....
*end of sarcasm* sadly.....this is what most people do near my age.....
Rental Property Investor · Erie, PA · Member since 2018 · 6k+ posts · 9k+ votes
7y
most millennials I know are financially illiterate and have no plan or desire to own a home . That may not be the “ norm” but I read that statistically almost 80% of millennials today can’t qualify for a traditional home loan . That’s alarming
Appraiser · Denver, CO · Member since 2018 · 40 posts · 58 votes
7y
There are an immense amount of responses here, so I can't effectively respond to each. Sorry everyone!
I love the group discussion that has ensued, however! All of this is getting me thinking.
There are a couple things I want to address. First, the 8% figure isn't comparing homeownership rates as they are now (obviously, the older generations would almost definitely have a much higher rate), but it is addressing the rate of homeownership while keeping age constant. Millennials, based on these statistics, are owning homes at less of a rate than any other generation before us when they were the same age as us.
I also want to express that my "investment strategy" isn't one dimensional and fully dependent on millennials not buying homes. Obviously, this would be a poor strategy that probably will not work in many areas of the United States. A retirement community in Florida, for example, likely has different problems than Detroit does, compared to San Francisco, and so forth. The investment analysis is entirely different depending on the market(s) you're in. But homeownership decreasing amongst a rising generation is an important influencer that should be taken into account, in my opinion. It may be broad, but it's pertinent.
I also noticed an interesting trend... Those that are in the Gen X or Baby Boomer category on here seem to have a totally different perspective than those that are millennials, on millennials themselves. It seems that many are quick to dismiss the notion that millennials aren't buying homes as often as other generations, as if it makes no difference. I believe it does, however. And I believe it's accurate, being a millennial, myself.
Millennials have vastly different ideals in today's day and age than other generations in a number of regards. One major difference is that millennials tend to be very non-committal. You can see this in the marriage rates (and average age that they get married), job market (millennials switch jobs at twice the rate as Gen X'ers for the first ten years after college), and yes, homeownership. Many millennials don't want to be tied down and rooted... Or at least, not yet. This non-committal isn't exactly a negative thing, however, it's just a difference in ideals. Millennials have the ability to travel at MUCH cheaper rates than previous generations, for example, which allows them to explore more. I am amongst this group. I've lived in four countries (Canada, the US, Germany, and Norway). I just tend to see real estate as a way to allow me to travel the world while living on passive income, if I wanted to. I believe there was a BP podcast that outlined a millennial doing exactly that with 5-6 properties, actually.
This doesn't mean that millennials don't ever want to buy a home. In fact, I believe most have a strong desire to, they just require a bit more time before they settle down (very similar to marriage, in this regard).
And regarding millennials living in more expensive housing... This is absolutely true in my market (Minneapolis). Millennials love the sleek, new condos with amenities. The University of Minnesota has several located nearby that are considered part of the student housing network (although they are private companies), all of which are relatively new concepts. In Uptown, the "trendy" area of Minneapolis, there are dozens of these higher-end condo complexes that draw the attention of millennials. It'll be interesting to see what happens if they become a bit more frugal as they get older, however, and reprioritize their finances. These overpriced condos will have difficulty staying afloat with even a minor market adjustment (particularly because so many of them have been popping up in the area). The supply/demand balance can shift quickly.
Anyways, this is just a thought experiment. I'm not putting all my eggs in this basket, but it's interesting to think about and discuss. I appreciate all your responses!
Investor · Anchorage, AK · Member since 2016 · 222 posts · 294 votes
7y
@Ryan P. Kotschedoff I just want to say that you are awesome! Only 16 years old, and engaging on the forums like this. You have a bright future my friend. Good luck to you!!
Rental Property Investor · Port Orange, FL · Member since 2018 · 78 posts · 43 votes
7y
I've followed this pretty closely, and my thoughts are fairly simple and straightforward regarding this... If millennials prefer to rent, areas that have a higher concentration of millennials would have a more competitive rental market and a less competitive purchase market. As an investor, that is great news... That being said, I believe that this will naturally balance itself out in areas where purchasing becomes the more affordable option.
Developer · Santa Clarita, CA · Member since 2008 · 15k+ posts · 10k+ votes
7y
I/we see lots of posts like this and I totally disagree with the main statement. To say that Millenials are not buying homes is a complete falsehood and simply put, statistics being manipulated for the authors pupose. I can take any numbers, twist them around, add and delete and come up with what I want.
The truth is, Millenials at the higher end of the age spectrum within this class are absolutely buying homes, they have way more savings than baby boomers or other preceding generations ever did (likely because us older folks have been preaching the importance of savings, controlled spending, and investing to the younger generations for decades now and they have seemed to listen.
Every single one of my buyers over the last 18 months (yes, every single one) was a 30 or so aged young couple with massive savings for down payment, great credit, and high income. That goes against all the stats presented. While you can argue that my personal experience is a minuscule proportion of all buyers, the point is that the original statement is false.
So here is what I suggest you take away from this: younger Millenials are not ready to buy yet but will, young couples starting families will prefer to own over rent no matter what generation they are in, and as a seller, catering to the common buyer in your area is key. Simply ignore the generalizations and articles that Millenials are slowing the buyers pool, just not true.
Realtor · Denver, CO · Member since 2013 · 2k+ posts · 1k+ votes
7y
Most of my clients are millenials, and they are buying. Once they have or get ready to have a kid, then it's buy time. A lot are just waiting to have kids from my personal experience, and that might be the delay. I'm quickly watching my neighborhood turn over to a younger crowd, which has been great.
Rental Property Investor · San Jose, CA · Member since 2013 · 486 posts · 170 votes
7y
We just recovered from one of the worst financial disasters since the depression. Because of this most millennials (gags at saying the word, im going with gen Y now) entered a terrible jobs market saddled with debt. Gen Y isn’t choosing to not buy home, they are be forced to due to their financial decisions.
Why should you own a home?
Protection from rent inflation. Owning a home can be seen as protection against rent inflation. Imagine if you had the opportunity to buy homes in the silicon valley back in the 1970s. My dad picked up homes for 20k a piece. Now those homes are selling for $1.5M and rent is $5k. If he would have said, “Nah bro, im good ill rent.” His retirement would have been crushed by current rental payments.
Less landlord drama. Do you want a landlord dictating what you can and cannot do to your home? No one does and after a while it can get tiring so you’ll want to control your own destiny by owning a home.
Why flush rent payments down the toilet when you can build equity. A home for your own personal consumption isn't an investment, but if you had the opportunity to build equity that you or your heirs could tap into down the road, wouldn't you want to?
When you raise a family you want space and privacy.
Assuming the economy doesn’t implode we will begin to see more gen Yers home ownership rate will fall inline with previous generations. We are already seeing this happen in some markets.
St Petersburg, FL · Member since 2014 · 65 posts · 22 votes
7y
In my market, there is a large millennial demand for homes. The problem they’re facing is low inventory. As such prices are being pushed up, and cash buyers are jumping at good deals. Thus millennials are having a tough time finding houses for the same reason investors are, tough competition. I suspect that as the market cools and rates go up, you’ll see more millennials buying. In our market this trend has been showing up as millennials buy new construction in distant suburbs or they buy refurbished homes in gentrifying neighborhoods.
Rental Property Investor · Boca Raton, FL · Member since 2016 · 17 posts · 7 votes
7y
I think this depends on your situation. If you own rental apartments then this trend should be effecting you in a positive way. Now if you own wholesale or flip homes or you are a relator this is a bad thing.
The only way I see that works in a positive way if you own homes and you are planning on holding them long term and use it as a rental.
Now of course as the younger generation grows up and gets better jobs and higher paying jobs and don't have too much student loan debt then I think eventually they will start buying homes.
Also, homes to me are also risky because not many of the older generation is wanting to own. With rentals looking better and the younger generation not buying homes.. not yet at least.. flipping and selling homes is going to be a whole lot harder. For a lot of people it just makes sense to rent. So like I said.. depends can be good for you and also be bad for you.
Lender · Oakbrook, IL · Member since 2018 · 34 posts · 9 votes
7y
I talk to plenty of millennials who already have 5+ properties, pretty impressive and will be retiring a lot earlier than most. Though when it comes to percentages there can be many more that should be taking advantage of the great programs that are out there and low rates especially for rentals. I find that there are plenty of properties where the rents are covering the PITI, millennials and many others just need to pull the trigger.
We just recovered from one of the worst financial disasters since the depression. Because of this most millennials (gags at saying the word, im going with gen Y now) entered a terrible jobs market saddled with debt. Gen Y isn’t choosing to not buy home, they are be forced to due to their financial decisions.
Why should you own a home?
Protection from rent inflation. Owning a home can be seen as protection against rent inflation. Imagine if you had the opportunity to buy homes in the silicon valley back in the 1970s. My dad picked up homes for 20k a piece. Now those homes are selling for $1.5M and rent is $5k. If he would have said, “Nah bro, im good ill rent.” His retirement would have been crushed by current rental payments.
Less landlord drama. Do you want a landlord dictating what you can and cannot do to your home? No one does and after a while it can get tiring so you’ll want to control your own destiny by owning a home.
Why flush rent payments down the toilet when you can build equity. A home for your own personal consumption isn't an investment, but if you had the opportunity to build equity that you or your heirs could tap into down the road, wouldn't you want to?
When you raise a family you want space and privacy.
Assuming the economy doesn’t implode we will begin to see more gen Yers home ownership rate will fall inline with previous generations. We are already seeing this
I bought my first home in Milpitas for 79k and it was new construction.. then I bought my next home in Palo alto for 185k then I bought my next home up at Silverado for 430k.. each one I made a mint on selling all tax free. so its regional for sure.. I made more money on these selling them than most will ever make in a lifetime with cash flow at 200 a door.. unless they own 100 doors.
