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.
Lender · Philadelphia, PA · Member since 2016 · 2k+ posts · 1k+ votes
7y
It depends on the kind of investor you are. Buy/holds will see an uptick. Flippers will see a price drop. You need this trend to be massive to impact the market in great scale. I am not sure that it is there yet.
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.
Back in 2000 I had coffee every morning on the beach, in Mexico, with a contractor from the UK. He confirmed that all he needed to do every 2 years was build, sell, move. At 45 he was retired from having to WORK but kept up his '2 year stint'.
Rental Property Investor · Erie, PA · Member since 2018 · 6k+ posts · 9k+ votes
7y
Obviously this is subjective opinion, but In my view I see millennials today that simply reject traditional values we’ve had in this country such as early home ownership and starting a marriage /family ,go to church ,have devoted career paths etc.. There’s appears to be a instability In Their
Thinking that results in erratic( usually bad) life choices .there is a self absorbed double mindedness about them that annoys me and its very concerning to consider they will be the future of our country .
Obviously this is subjective opinion, but In my view I see millennials today that simply reject traditional values we’ve had in this country such as early home ownership and starting a marriage /family ,go to church ,have devoted career paths etc.. There’s appears to be a instability In Their
Thinking that results in erratic( usually bad) life choices .there is a self absorbed double mindedness about them that annoys me and its very concerning to consider they will be the future of our country .
Obviously this is subjective opinion, but In my view I see millennials today that simply reject traditional values we’ve had in this country such as early home ownership and starting a marriage /family ,go to church ,have devoted career paths etc.. There’s appears to be a instability In Their
Thinking that results in erratic( usually bad) life choices .there is a self absorbed double mindedness about them that annoys me and its very concerning to consider they will be the future of our country .
Investor · Member since 2017 · 239 posts · 149 votes
7y
I was at a real estate conference not long ago and they had a big thesis that the reason millenial ownership was down was not just cost but actually people getting married earlier!!
They said that one of the major predictors of buying a home was getting married and having kids, and with people in the States doing that later in their life, the renter phase is getting extended. I thought that was a really interesting hypothesis and would suggest that this trend isn't changing anytime soon even with market changes.
Rental Property Investor · Upstate, NY · Member since 2012 · 3k+ posts · 3k+ votes
7y
I had one begging me for work, $15/hr to pay his rent & auto lease. He was an unemployed Masters in History & was sharing a home with 4 guys. He had a leased Corolla so I asked why he needed so much work as a leased Corolla runs $199/month & his rent was $250/month.
Then he tells me they rolled the financing for the BMW he had into the Corolla lease so his lease payments were over $500/month. He should have taken a minor in finance or at least simple addition.
I had one begging me for work, $15/hr to pay his rent & auto lease. He was an unemployed Masters in History & was sharing a home with 4 guys. He had a leased Corolla so I asked why he needed so much work as a leased Corolla runs $199/month & his rent was $250/month.
Then he tells me they rolled the financing for the BMW he had into the Corolla lease so his lease payments were over $500/month. He should have taken a minor in finance or at least simple addition.
This is way too common! Trading in car for a newer one and rolling the loan over. Exponential interest adds to the next vehicle. YES it looks like the person can afford it, but the debt to income ratio gets soooo bad! A small slap on life gets them crumbling or seeking for help.
Rental Property Investor · Phoenix, AZ · Member since 2013 · 919 posts · 911 votes
7y
Although it is true that the Millennials aren't buying homes, that is NOT where it all starts/stops.
Over the next 15 years we are going to have ZILLIONS of baby boomers exit the workforce and retire.
The problems we have are as follows:
1. Millennials have been saddled with massive school debt, which can be as much as a house note.
2. They are not making enough money to service this debt, let alone take on new debt.
3. They dont invest like previous generations. Investing is a fantasy. So, when the baby boomer goes to sell their stock, WHO is going to buy it? Answer: NO ONE. The market will, eventually, fall like a rock.
We, as a country, are in for some HUGE changes over the next 15-20 years. Corporate pensions: Underfunded and Under-insured. State/Local pensions: Underfunded due to unrealistic 'models'. Govt pensions: Underfunded, but they can print more money ;-). 22 TRILLION in debt, and counting higher every day. Who is gonna pay that? We can no longer 'inflate' out of it or we are going to look like a 3rd world country or banana republic. Although some may say we are already there.
As an investor, I have seen prices of RE almost double in my area since 2010. It's not sustainable. My rents are up significantly, but I know my tenants incomes' are not up significantly.
My belief: Recession in less than 24 months. And it won't be good. :-(
Investor · Shakopee, MN · Member since 2014 · 219 posts · 88 votes
7y
I don't believe millennials won't buy. I think they might just trend to buy later.
If population keeps growing, people will keep needing places to live whether rent or purchase.
Not to get too political, but a bigger concern is the growing divide between rich and poor, and our uncertain future around healthcare.
If those parts of people's lives become more stable, they will be more comfortable in facing decisions like purchasing a home which intimidates most people in a day when most purchases can be done with a touch of your phone screen.
Although it is true that the Millennials aren't buying homes, that is NOT where it all starts/stops.
Over the next 15 years we are going to have ZILLIONS of baby boomers exit the workforce and retire.
The problems we have are as follows:
1. Millennials have been saddled with massive school debt, which can be as much as a house note.
2. They are not making enough money to service this debt, let alone take on new debt.
3. They dont invest like previous generations. Investing is a fantasy. So, when the baby boomer goes to sell their stock, WHO is going to buy it? Answer: NO ONE. The market will, eventually, fall like a rock.
We, as a country, are in for some HUGE changes over the next 15-20 years. Corporate pensions: Underfunded and Under-insured. State/Local pensions: Underfunded due to unrealistic 'models'. Govt pensions: Underfunded, but they can print more money ;-). 22 TRILLION in debt, and counting higher every day. Who is gonna pay that? We can no longer 'inflate' out of it or we are going to look like a 3rd world country or banana republic. Although some may say we are already there.
As an investor, I have seen prices of RE almost double in my area since 2010. It's not sustainable. My rents are up significantly, but I know my tenants incomes' are not up significantly.
My belief: Recession in less than 24 months. And it won't be good. :-(
People have been preaching about a second recession for about 8 years now.
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.
However, things are MUCH different now vs the 2008 meltdown. All I did was point out SOME of the differences.
If you truly don't think that the baby boomers EXITING the workforce will have any effect, you just need to go back and look at when they ENTERED the workforce.
When the 'greatest generation', those who fought WWII were close to their retirement days, there were TWO baby boomers ready to take each of those jobs. Spending habits are MUCH different for retirees than they are for ppl who have families. And those are facts.
Irvine, CA · Member since 2016 · 545 posts · 614 votes
7y
@Jaron Walling I agree, Millineals will start to buy homes in larger numbers once social media tells them to do it, sad but true. I will add that I do see a divide in the Millineals where the more financially successful ones tend to spend less time on non-business related social mostly focusing on the use of social media to enhance their lives.
Although it is true that the Millennials aren't buying homes, that is NOT where it all starts/stops.
Over the next 15 years we are going to have ZILLIONS of baby boomers exit the workforce and retire.
The problems we have are as follows:
1. Millennials have been saddled with massive school debt, which can be as much as a house note.
2. They are not making enough money to service this debt, let alone take on new debt.
3. They dont invest like previous generations. Investing is a fantasy. So, when the baby boomer goes to sell their stock, WHO is going to buy it? Answer: NO ONE. The market will, eventually, fall like a rock.
We, as a country, are in for some HUGE changes over the next 15-20 years. Corporate pensions: Underfunded and Under-insured. State/Local pensions: Underfunded due to unrealistic 'models'. Govt pensions: Underfunded, but they can print more money ;-). 22 TRILLION in debt, and counting higher every day. Who is gonna pay that? We can no longer 'inflate' out of it or we are going to look like a 3rd world country or banana republic. Although some may say we are already there.
As an investor, I have seen prices of RE almost double in my area since 2010. It's not sustainable. My rents are up significantly, but I know my tenants incomes' are not up significantly.
My belief: Recession in less than 24 months. And it won't be good. :-(
I think this can be a good discussion and you are throwing a lot of things out there. I don't know what analytics you are pulling from to create your opinions or if you are just reciting what you've read or heard elsewhere.
A couple comments about your points.
1. Millennials have been saddled with massive school debt, which can be as much as a house note.
This might be true, but to what degree? My college debt was larger than my parents because they didn't go to college. Also, my house debt was more because of inflation. I also earned more in my job in 2000 than someone similar would have in 1960. Student debt may become an epidemic on it's own, but it by itself might not be enough to cripple our society. Many millenials may also have access to purchasing power to buy multiple houses (become landlords themselves). If you have numbers on average debt, average incomes, average access to credit, we can further diagnose if we are in trouble.
2. They are not making enough money to service this debt, let alone take on new debt.
Do we know what percent of millenials are defaulting on their debt? Also, the ones who are not (if there is a growing wage gap of rich and poor) do they also have the ability to purchase multiple properties? Perhaps Gen X'ers had 1 in 20 defaulting, but 3 in 20 could afford 2 properties. Are we now seeing millenials with 1 in 8 defaultings, but 3 in 20 who cold afford 5 properties each? (Poor getting poorer, rich getting richer)
3. They don't invest like previous generations. Investing is a fantasy.
Do we know this? Again, maybe the richest 5% are investing far more any ever before? Also, if they aren't investing, what are they doing with their money? Just paying more in rent? If so, are they living at home paying rent to their parents or are they paying to baby boomer landlords? Things I don't believe they are investing in are ultra expensive cars and diamond rings.
If you have more stats to outline this, I'd be happy to discuss in more detail, but what you throw out are generalities. From personal experience I see millennials joining the workforce making far more than I did when I started. Part of this is due to inflation which ultimately is what keeps our nation going generation to generation. I didn't invest in my first 5-10 years of working.
Baby boomers
One other point, with so many baby boomers leaving the workplace, who will take those higher paying jobs? Either companies will need to take additional profits or they will pay someone else those wages. I was expecting this massive exodus of baby boomers to start 10 years ago as baby boomers started hitting age 65. Now, 10 years late, the youngest baby boomers are turning 60 and the ones who are retirement age have been slow to leave the workforce.
There will be an impact when the baby boomer generation fully retires and again when they pass away, but I don't know if that means despair for those of us remaining.
With the technological changes where the very core of how we work is changing (people working remote for example and less reliance on a motor vehicle), I think it's really hard to predict doom and gloom.
Yes, we will have recessions, but I doubt anything close to what compares to 2008. If you have further details to illustrate this collision course with a terrible recession, I'd appreciate anything you can share so I can better draw a conclusion to prepare for it.
Rental Property Investor · Clarksville, TN · Member since 2019 · 44 posts · 31 votes
7y
@Tyler Erickson from what I have studied in economics inflation has a big part (not all) to play into the younger generations purchasing less. In today’s age the perception is that a degree has more value than a home. The first step these guys are taking out of high school plummets them into debt that most can’t handle and even fewer can leverage to an advantage.
What this means for investors can be both good and bad. Without buyers you don’t have sellers. However if your looking to rent, the market is exploding.
One fact remains true through the generations. Those who think AND act will find prosperity. Those who only do one or the other will need luck.
Rental Property Investor · Durham, NC · Member since 2016 · 7k+ posts · 7k+ votes
7y
@Dennis M. To be fair if it was a single family or small mom or pop landlord I would agree with you. That’s not the case. It’s a large landlord that owns like 10000 apartments in 14 states last I checked. And hey if they had an issue with my requests I’m sure they’d say something but so far no issues anywhere lol.
Also you missed the lease renewal about 2-3 months ago as I renewed then. Lol
Property Manager · Columbia, SC · Member since 2017 · 121 posts · 163 votes
7y
I think another important reason for the reduction / delay in home ownership for Millennials is the location they are ultimately choosing to live. There are many articles focusing on this trend towards larger cities by millenials. And this is anecdotal, but I did notice that nearly all of my classmates in college went to NYC, Boston or Chicago after graduating to chase the high paying jobs (or only jobs) that were available following the great recession. While their opportunities & incomes were likely greater in those cities, so was their living expenses and housing costs. In these high density cities, it often doesn't make financial sense to move into home ownership.
However, being 10 years past the great recession, it seems like things are changing and cheaper and smaller urban locations are becoming more popular. I would not be surprised to see home ownership start to trend back up as this correction takes place.
Investor · Shakopee, MN · Member since 2014 · 219 posts · 88 votes
7y
Keep in mind, millennials all live somewhere.
They either buy a house, rent an home, rent an apartment, or float from hotel room, to AirBNB, to hotel room, to tent. Or maybe they buy tiny houses. Or maybe they camp out in a forest building their own home out of leaves and lumber while curating their own espresso beans.
As a real estate investor, part of our goal should be to identify the trend, and capitalize on it. Whether that's buying SFH's in the suburbs, apartments downtown, AirBNB's on islands, or forest land in a Costa Rica that can be rented out to campers.
The financial impact of each varies, but they will live somewhere.
Also, please note that many Gen X'ers are raising Gen Z'ers. Gen Z'ers from early reports are a very practical generation who are very self-responsible and don't spend money on things they don't need.
If a Gen Y'er doesn't buy your house, in a few years, a market a Gen Z'ers will be there to take advantage of a good opportunity.
