Millennials aren't buying homes - good or bad?

Millennials aren't buying homes - good or bad?

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? 

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Russell BrazilBusiness Member
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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.

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  • Rental Property Investor · Phoenix, AZ · Member since 2013 · 919 posts · 911 votes
    7y

    @Dan D.  Most baby boomers were/are ill-prepared for retirement.  As a result, they stayed in the workforce longer in order to maximize social security.

    Many of the younger baby boomers know they have to stay in the workforce longer as retirement ages have increased due longer life spans.

    But I have witnessed, far too often, 'grandma' working at the local Wendy's/BurgerKing/McDonalds.  I don't think (in many cases) it is because she 'wants' to, but because she has to.   

    Pensions have already been cut in a number of municipalities around the country.  Usually when the entity declares bankruptcy.  For MANY, these federal/state/local pensions were these workers' ONLY retirement incomes.  In many cases the workers were either not allowed or 'exempt' from social security withholding due to their pensions.  When you have hundreds of thousands of ppl (maybe millions), who are no longer capable of working, get their incomes slashed, what do you think MIGHT happen?

    http://www.governing.com/gov-institute/voices/col-... 

  • Investor · Shakopee, MN · Member since 2014 · 219 posts · 88 votes
    7y
    Originally posted by @Alan Grobmeier:

    @Dan D.  Most baby boomers were/are ill-prepared for retirement.  As a result, they stayed in the workforce longer in order to maximize social security.

    Many of the younger baby boomers know they have to stay in the workforce longer as retirement ages have increased due longer life spans.

    But I have witnessed, far too often, 'grandma' working at the local Wendy's/BurgerKing/McDonalds.  I don't think (in many cases) it is because she 'wants' to, but because she has to.   

    Pensions have already been cut in a number of municipalities around the country.  Usually when the entity declares bankruptcy.  For MANY, these federal/state/local pensions were these workers' ONLY retirement incomes.  In many cases the workers were either not allowed or 'exempt' from social security withholding due to their pensions.  When you have hundreds of thousands of ppl (maybe millions), who are no longer capable of working, get their incomes slashed, what do you think MIGHT happen?

    http://www.governing.com/gov-institute/voices/col-...

    Good point you bring up about retirement pensions and social security.  How do we measure this to predict the impact?  What percentage of these retirees have mortgages to pay off yet?  What percent have tax rates that are too burdensome where they need to give up their properties?

    When this happens, are they being foreclosed upon, or are they selling and taking equity to downsize?

    It's a horrible situation for any baby boomer to lose their home because their pension is gone.  Is that 50%, 25%, 10%, 1%, 0.1%, of 0.0001% of baby boomers however?

  • Rental Property Investor · Phoenix, AZ · Member since 2013 · 919 posts · 911 votes
    7y

    @Dan D.  The point I was making that whatever the number/percentage is TODAY, it is bound to go up as municipalities & companies 'bail' on the promises that were made to their workers.  This will not be a problem easily solved.  If you try to 'inflate' your way out, the pensions will have little buying power.  If you just cut the pensions, the pensioner will still not have the same buying power they were promised.  I believe they will inflate it vs cutting, but that's my opinion.  

    And that, of course, is BEFORE you get to the funding of 'social insecurity'.  ;-)

  • Investor · Shakopee, MN · Member since 2014 · 219 posts · 88 votes
    7y
    Originally posted by @Alan Grobmeier:

    @Dan D.  The point I was making that whatever the number/percentage is TODAY, it is bound to go up as municipalities & companies 'bail' on the promises that were made to their workers.  This will not be a problem easily solved.  If you try to 'inflate' your way out, the pensions will have little buying power.  If you just cut the pensions, the pensioner will still not have the same buying power they were promised.  I believe they will inflate it vs cutting, but that's my opinion.  

    And that, of course, is BEFORE you get to the funding of 'social insecurity'.  ;-)

    I don't disagree with your point, but predicting the impact of this is difficult.

    Right now the best guess you or I have in regards to the impact of this that it will be catastrophic, to negligible, to possibly an inexplicable positive consequence.

  • Mesa, AZ · Member since 2018 · 24 posts · 9 votes
    7y

    As far as 'ways to capitalize on the real estate market', I'd say look at developing properties with an eye towards rentals. Rather than looking for stats solely on home ownership, expand a bit to look for data on rentals. If you are stressing about ownership, you may be happier to see a few charts about rentals.  I'll share one set:

    The first chart is Quarterly Rental and Homeowner Vacancy Rates for the Unites States: 1995-2018.  Which shows decreased inventory.  The second then, which is Median Asking Rent for Vacant for Rent Units: 1995-2018, shows that upward pressure on rents that you'd expect to see.  

    Prepping a property for rental vs an owner, is a bit different, and you'll find some good advice elsewhere here on Bigger Pockets. Also, if you are going to be a holder, this may explain some of the focus on 'BRRR'.

    Data: https://www.census.gov/housing/hvs/files/currenthvspress.pdf

  • Real Estate Broker · Miami, FL · Member since 2015 · 59 posts · 37 votes
    7y
    @Tyler Erickson more reasons to keep investing in rental properties. Which is the origin of real estate investing.
  • Member since 2019 · 1 post · 0 votes
    7y

    Well reasoned

  • SF- East Bay Area · Member since 2019 · 13 posts · 6 votes
    7y

    As a fellow millennial myself (the younger side of the spectrum) the lack of motivation of home ownership is 

    1. Home prices being extremely high

    2. Student debt

    3. The "wanderlust"/YOLO culture Gen Z and Millennials have nowadays. 

    In my market (the Bay Area) we actually have a healthy number of millennial buyers. Most of them are working in Tech or in the medical field. I would say give it another few years, then we will see the younger half of the millennial and the older millennials who pay off their student debt enter the buying market. 

    Speaking from my personal circle, all my friends want to become home owners, they just have lack of faith due to the market, student debt, or they just do not make enough money. 

  • Real Estate Broker · Windsor, CT · Member since 2015 · 1k+ posts · 268 votes
    7y

    I am also a millennial/realtor, I have noticed many more millennial wanting to rent as opposed to owning . I think we should also look at the average time a employee between the ages of 25-34 stay at their employers. I think there is a direct correlation with the length of employment with one employer and stability which in turn has a effect on whether or not a millennial would be willing to purchase a home. 

  • Investor · San Antonio, TX · Member since 2018 · 18 posts · 11 votes
    7y

    Great post @Tyler Erickson. I have been seeing a big increase in demand for multi-family here in San Antonio. SFR is still selling strong, especially in the right areas but Multi-Family is definitely on the rise.

    Just a thought but could it be the big names like Grant Cardone influencing them? He's big on buying multi-family and renting where you live. Not to mention, a lot of millennial (at least all of my friends) are more interested in moving right after college or travelling more.  

    @Russell Brazil you make a good point!

  • Real Estate Agent · Clarksville, TN · Member since 2017 · 26 posts · 13 votes
    7y

    Granted, I haven't done a ton of research on this as a millennial, but I think as they (we) get older, our minds may change; maybe I'm just optimistic. Personally, I like the security that buy and holds offer (whether multi family or sfh) in some markets, but, specific to millennials, there's such a push within their (our) generation to travel, I would say STR are probably a good thing to look into considering the circumstances (or like creative living—people wanting to live off grid, in vans, TVs, tiny homes). Millennials seem (whether it's the generation or where they/we are in life), to be about the experience. Create an experience and rent it out. I currently help manage three (hopefully four) STRs and, not to jinx it, so far it's been great and I'd say financially beneficial.

  • Real Estate Agent · Clarksville, TN · Member since 2017 · 26 posts · 13 votes
    7y

    I should add, however, that things are always changing so STR may not be a 40 year plan, who knows. I'm an agent, though, so if I thought home ownership was disappearing, I wouldn't have left pharmaceuticals for real estate, ha!

  • Rental Property Investor · Johnstown, PA · Member since 2017 · 71 posts · 42 votes
    7y

    @Tyler Erickson you bring up several interesting points. However, I would point out that the last of the millennials (us) just graduated college last year. Adding to the fact that they’re getting married later, there’s a lot of data yet to be collected.

    I do expect home ownership to be lower, but I think savvy single home investors can capitalize on the millennials’ interest in the environment and energy efficiency with mindful renovations or marketing toward reducing wasteful renovations. I think the McMansions may see a dip, but I could be wrong.

    As for multi families, this will obviously increase the tenant pool, which is never a bad problem to have as a landlord.

    However, home ownership is a big part of local economics so it will be interesting to see how a decline/delay in home ownership will affect local economies.

  • Real Estate Agent · Colorado Springs · Member since 2016 · 22 posts · 13 votes
    7y

    Tyler, Great post. I'd just like to add Grant Cardone has been harping on that for a few years now, he believes that we are going to a renter nation because nobody wants to be tied down with a mortgage and the millennials don't want the responsibility of owning a home. This is good to as it will increase the number of tenants to rent your properties. 

    Grant has been on a couple of the podcasts on BP but has lots of information out there available for review. Happy investing.

  • Specialist · Nashville & Indianapolis · Member since 2018 · 10 posts · 9 votes
    7y

    I'm 33. I think I count as a millennial, lol. I have never been interested in owning a home until maybe like 2 months ago. And the driving force behind that is my dog. I don't wanna have to get up and walk him every morning at 6AM just so he can pee. He needs a yard. The idea of having 1 place to live and not being able to move around is a turn off to me. I'm much more into renting.

    Anyway - that's just my .02

  • Member since 2019 · 4 posts · 3 votes
    7y
    @Tyler Erickson generation Z will be more apt to buying real estate, they're far more entrepreneurial than millennials
  • Rental Property Investor · TX · Member since 2019 · 236 posts · 392 votes
    7y
    Originally posted by @Dennis M.:

    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 .

     100% accurate.  

  • Real Estate Broker · Los Angeles, CA · Member since 2017 · 655 posts · 293 votes
    7y

    Millennials also are dealing with student loan debt. Everything will work itself out - we might see more renters for the time being but everything in life cycles

  • Flipper/Rehabber · Los Angeles, CA · Member since 2009 · 1k+ posts · 732 votes
    7y
    Originally posted by @Dennis M.:

    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 .

     Weren't the same things said about every other previous generation? If you go back to what was said in the media back in the 50s, 60s   it was the same things said...but they turned out ok. Many became visionaries, CEOs, millionaires, billionaires, doctors, philanthropists . 

  • Flipper/Rehabber · Los Angeles, CA · Member since 2009 · 1k+ posts · 732 votes
    7y
    Originally posted by @Kaley Roberts:

    Tyler, Great post. I'd just like to add Grant Cardone has been harping on that for a few years now, he believes that we are going to a renter nation because nobody wants to be tied down with a mortgage and the millennials don't want the responsibility of owning a home. This is good to as it will increase the number of tenants to rent your properties. 

    Grant has been on a couple of the podcasts on BP but has lots of information out there available for review. Happy investing.

     I find it funny/ironic in a way that Grant Cardone seems to be really popular in the real estate industry , but he is constantly telling his audience not to buy a home and that it's such a stupid thing to do. I've heard him say that unless you have $5 million you shouldn't think of buying a home to live in. Pretty crazy advice, but part of his thing is to be controversial I guess. His idea is that if you are young you should be moving around the country every couple years for the best opportunity , some people do that but most don't. 

    He owns or syndicates a lot of multi family so of course it's in his interest for younger people to be renters...and of course take advantage of putting their savings into his syndication fund!  

    I think he has some good things to say about thinking bigger , but some things he says are just ridiculous. Robert Kiyosaki is like that also. I heard him say on a recent interview the next financial crisis will be like "auschwitz"  I was like really??

    Both super successful and rich guys but they say some crazy stuff.

  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    7y
    Originally posted by @Dan D.:
    Originally posted by @Alan Grobmeier:

    @Dan D.  Most baby boomers were/are ill-prepared for retirement.  As a result, they stayed in the workforce longer in order to maximize social security.

    Many of the younger baby boomers know they have to stay in the workforce longer as retirement ages have increased due longer life spans.

    But I have witnessed, far too often, 'grandma' working at the local Wendy's/BurgerKing/McDonalds.  I don't think (in many cases) it is because she 'wants' to, but because she has to.   

    Pensions have already been cut in a number of municipalities around the country.  Usually when the entity declares bankruptcy.  For MANY, these federal/state/local pensions were these workers' ONLY retirement incomes.  In many cases the workers were either not allowed or 'exempt' from social security withholding due to their pensions.  When you have hundreds of thousands of ppl (maybe millions), who are no longer capable of working, get their incomes slashed, what do you think MIGHT happen?

    http://www.governing.com/gov-institute/voices/col-...

    Good point you bring up about retirement pensions and social security.  How do we measure this to predict the impact?  What percentage of these retirees have mortgages to pay off yet?  What percent have tax rates that are too burdensome where they need to give up their properties?

    When this happens, are they being foreclosed upon, or are they selling and taking equity to downsize?

    It's a horrible situation for any baby boomer to lose their home because their pension is gone.  Is that 50%, 25%, 10%, 1%, 0.1%, of 0.0001% of baby boomers however?

    I think you would be surprised at how many own their homes free and clear especially in low value markets.  I know its always been a goal of mine and my retirement home is paid for now.. I do cringe at those who are ripping equity out of their homes to risk buying low value rentals in other areas.. the risk is real.. the rental does not work right and now you have little to no equity.    

  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    7y
    Originally posted by @Joseph M.:
    Originally posted by @Dennis M.:

    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 .

     Weren't the same things said about every other previous generation? If you go back to what was said in the media back in the 50s, 60s   it was the same things said...but they turned out ok. Many became visionaries, CEOs, millionaires, billionaires, doctors, philanthropists . 

     ya try growing up in San Francisico in the 60s and wondering around height ashbury..  its was great.. :)  rock n roll

  • Real Estate Broker · Northwest Arkansas · Member since 2018 · 9 posts · 9 votes
    7y

    @Russell Gronsky @Robert Leonard I own two Airbnbs in & near a college town. It's a weird animal and after 9 months, I'm actually transitioning out of it. It's far from passive income, and it can be feast/famine. So while the numbers may be lower on long-term renting, it's way more steady & passive. And don't even get me started on the CRAZIES that arrive to rent Airbnbs.

    I also think more and more people are trying their hand at Airbnb which eventually will over-saturate the market. Unless you've got a prime location or unique experience, your competition will get more and more complex. 

    My new motto: I don't want my $ and investment resting on someone's opinion of the linens and shampoo!

  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    7y
    Originally posted by @Dennis M.:

    Yeah I suppose the greatest generation thought the same thing about the “ hippy ” generation of the 60’s 

    you understand the greatest generation when you stand on the cliffs were D day took place. and or stand in those Pill Box's 

    It was just surreal to think of those young men storming that beach against those odds.. really puts greatest generation into perspective

    at least it did for my wife and I.  

  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    7y
    Originally posted by @Jennifer McMurray:

    @Russell Gronsky @Robert Leonard I own two Airbnbs in & near a college town. It's a weird animal and after 9 months, I'm actually transitioning out of it. It's far from passive income, and it can be feast/famine. So while the numbers may be lower on long-term renting, it's way more steady & passive. And don't even get me started on the CRAZIES that arrive to rent Airbnbs.

    I also think more and more people are trying their hand at Airbnb which eventually will over-saturate the market. Unless you've got a prime location or unique experience, your competition will get more and more complex. 

    My new motto: I don't want my $ and investment resting on someone's opinion of the linens and shampoo!

     ya I think herd mentality in that industry will canabalize it in certain areas no doubt. but you have those that will do it more or less as a job they chose to do..  I think were your pretty safe is in cities that really require permits.. Like Charleston. but cost to enter is very high

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