HOUSTON – (By Dale King, Realty News Report) — Millennials have finally reached a significant milestone in the real estate market. Slightly more than half of them are now homeowners. But 25 percent have given up hope of ever being a home owner.
The information is contained in the just-released, fourth segment of the Apartment List Millennial Homeownership Report, which employed data from the U.S. Census Bureau to reach its conclusions. By definition, millennials are folks born between 1981 and 1996, says the Apartment List survey drafted by Rob Warnock, senior research associate.
“Today, the median millennial is a homeowner,” said Warnock in the report, “with the latest millennial homeownership rate standing at 51.5 percent.”
It took a while for millennials to slide across the halfway point, said Warnock. “The last three generations have bought homes more slowly than the generation that preceded them. Millennials have had the slowest transition from renters to homeowners. By age 30, 42 percent of millennials owned their homes, compared to 48 percent of Gen Xers, 51 percent of baby boomers and nearly 60 percent of ‘the silent generation’ [people approaching their 80s and 90s].”
Right now, Generation X is on the cusp of reaching 70 percent homeownership. Seventy-seven percent of “silents” own their homes, but the rate is slowly declining as they age into their 80s and 90s and some face the need to move in with younger relatives or into assisted living facilities.
Baby Boomers, born into the suburbs that emerged rapidly after World War II, maintain the nation’s highest homeownership rate today at 78 percent.
But Warnock’s Apartment List survey also contains discouraging news about some dejected millennial renters who feel they will never have the wherewithal to purchase a home. Millennials who can’t break out of the rent cycle “are getting priced out of the homeownership market by rapidly rising prices,” said Warnock.
No Hope: One-Fourth Have Given Up Hope of Home Ownership
Apartment List’s survey says 25 percent of renters have given up the hope for home ownership, saying they “will rent forever.” And two-thirds of renters say they have no money set aside for a down payment, added the survey’s author.
Over time, many millennial renters have become more likely to place themselves into the “rent forever” category. The Apartment List survey says that segment of millennials has almost doubled from 13 percent in 2010 to 24 percent in 2022. The large jump in “forever renters” between 2019 and 2020 shows the immediate impact of the pandemic, when an already-challenging housing market reached a new level of un-affordability.
“Despite the fact that more than three-quarters of today’s millennial renters plan to buy a home in the future, many are still a long way from realizing their goal,” said Warnock. “As list prices soar, our survey finds that two-thirds of aspiring homebuyers have not dedicated down payment savings, and only 15 percent have saved $10,000.”
Some renters have met some level of success in making the move to home ownership, the survey says. “Today, we find that millennials living in non-metropolitan areas and smaller markets with fewer than one million residents are the most likely to become homeowners,” said Warnock. “In metros with 1 to 5 million residents, homeownership falls to 48 percent, and across the nation’s largest metros, it falls to 41 percent.”
Warnock noted that only a handful of the nation’s large metropolitan areas have a millennial homeownership rate above the national average of 51.5 percent.
Led by the Grand Rapids, Mich., metro, where 63 percent of millennials own their homes, the markets with the highest rates are concentrated in the Midwest and Great Lakes regions, which offered some of the country’s lowest cost of living numbers and highest residential vacancy rates (at least before the pandemic shook up the housing market).
Expensive coastal markets dominate the other end of the list. California is home to the four metros with the lowest millennial homeownership rates: Los Angeles (27 percent), San Jose (31 percent), San Francisco (33 percent) and San Diego (34 percent).
The New York City metro comes in fifth, also at 34 percent. Notoriously pricey coastal markets like Miami, Portland, Seattle and Boston also find themselves around the bottom of the list. Despite offering relatively high incomes, these regions remain unaffordable to most millennials.
Metros in Texas are a bit behind in the millennial numbers. Warnock’s survey says 46 percent of millennials living in Houston are homeowners; 45 percent of those living in San Antonio have a deed to a home in their possession and in both Austin and Dallas, about 42 percent of millennials possess keys to their own home.
As millennials slowly find their footing in the housing market, the homeownership challenges that have emerged over the past decade are now falling squarely on the shoulders of the next generation, Z, said Warnock.
Gen Z (Under 25) Has Never Seen a Healthy Market
“Currently aged 25 and younger, the majority of Gen Z renters have never known a healthy housing market, and in our renter survey already 20 percent describe themselves as ‘forever renters.”’
The recent softening in home prices is providing some relief, he said, but it is also discouraging existing homes from being listed for sale, and hindering new single-family homes from being developed, so it is likely a persistent supply shortage will keep prices from falling to widely affordable levels.
“This highlights the growing importance of multi-family housing, the industry sector that rebounded fastest after the Great Recession and has continued to receive steady investment over the past year, even as rising interest rates tempered single-family development,” he said.
“It is possible that if attitudes towards homeownership shift to de-emphasize single-family homes, multifamily could provide an alternate path to homeownership as Gen Z reaches their homebuying years.”
May 1, 2023 Realty News Report Copyright 2023
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File: Half of Millennials Own Homes