You may have read the statistic that reveals millennials as today’s largest demographic of homebuyers. In some ways, those figures are accurate. This group holds more than 35% of the total housing market share and this number is only expected to increase. Yet, at the same time, more and more of these potential buyers are opting to rent instead. In fact, research shows that millennials will spend a collective $97,000 on rent per year.
With so many housing options at their fingertips, why are these young buyers deciding to go the route of the rental? The answer may boil down to convenience and amenities, though that’s not always the case.
Today, we’re taking a look at a few reasons why millennials are flocking to rentals and away from traditional home ownership. The answers might surprise you, so let’s get started!
A Comparison of Past Demographics
Before we delve into the reasons this housing option is amplifying, it’s helpful to understand how the actions of today’s millennial generation compare to those of their ancestors. For comparison’s sake, 61% of Early Boomers in 1981 moved into single-family homes when they were ready to leave their parents’ nest. At the same time, 61% opted to rent instead.
Through the years, these numbers shifted steadily in the favor of renting, with 62% of Generation Xers choosing to rent compared to 74% of millennials. Still, while the general trend has been on an uptick, 74% today compared to 61% back then presents the central question: Why are millennials more prone to rent and what are they looking for in their next rental? Let’s explore.
The Cost Factor
Chiefly, renting is an attractive option to millennial customers because it allows them financial flexibility. A traditional mortgage is often accompanied by a 30-year or 15-year loan, both with high interest rates. This can feel like a saddling fate to those fresh out of college who are just entering the job market or still haven’t found their career comfort zone yet.
On the other hand, a rental agreement often doesn’t span more than one year at a time, meaning that tenants can better plan ahead in the event they change their mind or life takes them in a new direction.
Keep in mind that many of these renters were just getting out of college when the Great Recession hit from 2007 to 2009. Money was tight, jobs were scarce, student loan debt was high, and saving money became more important than ever before. Though the economy has adjusted favorably since then, millennials aren’t quick to forget. Most of them are still frugal, especially when it comes to their living situations. They’d rather shell out a small amount of money each month rather than put all of their earnings into a long-term investment, such as a single-family home. The expense to rent, which can add up over time and ultimately eclipse home ownership cost, feels like a smaller bit to chew off and a more manageable bill to pay.
A Later Start on Family Life
Is a single-family home truly necessary when one just wants to live alone for a little while? According to a recent Gallup poll, millennials don’t place as much importance or urgency on marriage compared to their parents and grandparents.
Instead, this group is taking time to themselves after college. They’re exploring their interests, excelling in the job market and spending time with their friends and colleagues. As such, they’re less interested in how many bedrooms and bathrooms a home contains.
A More Nomadic Lifestyle
In a similar vein, millennials aren’t as attracted to the idea of being tied down to a particular community and career for all of their lives. Rather, they appreciate the ability to pack up and move when they please or when a better offer comes along.
Remember, this is the generation that does more job-hopping than any one that came before it. They enjoy the diversity of holding many different job titles and learning as they go. As such, they’re more likely to be attracted to short-term options such as renting that allow them that freedom.
A Rent-to-Own Perspective
Another reason millennials are flocking to rentals is that they offer them the chance to see how a particular part of town is a place they’d eventually like to put down roots. For instance, someone considering moving to Chicago might rent in the heart of the city for a few months to get a feel for its layout, traffic level, nearby dining and entertainment options and outlying communities.
Then, when his or her career steadies out and they’re ready to become a little more established, they’ll know which parts of the town they love and which they aren’t crazy over, and can make a more educated moving decision with that data in hand. In the meantime, they can live in a range of rental options, including studio apartments and multi-person student housing communities. You can find out more about the latter if you’re a current student in need of affordable rental housing close to your university.
The Appeal of a Hands-Off Lifestyle
In short, renting is easy. A landlord or property manager takes care of all repairs and often handles yardwork, as well. Usually, utility expenses are also rolled into monthly rent, meaning that’s one less bill per month that tenants have to stress over. This is especially appealing to homeowners who value both self-care and free time. Handing over the reigns to someone else means less time worrying and more time relaxing.
The only downside is that if a repair isn’t done to the renter’s liking, getting it changed or corrected can be a hassle. Still, for the flexibility it provides, renting is a seamless way for millennials to enjoy all of the perks of a home without the chores and complications that go alog with ownership.
Appealing to Millennial Renters
A real estate agent should take the time to go over every option and present it to a millennial client. Though many are renting, there is still a significant number opting to buy instead, seeking to build up equity and deduct the property tax and interest from their taxes.
Present both options and explain the pros and cons of each. Then, you can have a more successful and direct conversation about where to go from there.
