According to Fact Tank at the Pew Research Center, 2015 will be the year the “Millennial” generation (Ages 18-34) will surpass the Baby Boom generation. As the numbers of Baby Boomers decrease, due to normal life expectancy, this trend will continue. The large numbers in this generation combined with other factors affecting their finances is why they are the renter generation and investing in apartments makes financial sense. The demand for apartment rentals and multi-family properties has been high. Not only does this generation have the numbers to make an impact, but this generation is dealing with a couple of factors that the previous generation didn’t have to grapple with.
For starters, it’s become common logic that in order to get a decent paying job, it’s best to get a college degree. Just having a high school diploma will most likely not lead to a high-paying job due to the decrease in manufacturing in the USA. Prior generations had the ability to get out of high school and work at a manufacturer for the rest of life and have job security, such as an auto maker. That reality has changed due to the bail-out of the auto industry and the offshoring of jobs. Sometimes getting those college degrees doesn’t pay-off with a good paying job, but the graduate is still saddled with the education debt they will be paying for years to come.
The recession has made it harder for lenders to qualify borrowers to get a loan to purchase a house. In order to avoid another financial meltdown, the government has made it harder for banks to make loans. Combine that with people having a difficult time finding good paying jobs out of college, along with the debt from college and it’s no wonder that the homeownership rate has dropped significantly.
I do predict this is likely to change but it will take several years. As long as lenders continue on their same path of conservative qualifying, I believe the homeownership rate will begin to increase after several years. Companies, such as Target and WalMart, raising the minimum wage and the city of Los Angeles raising the minimum wage to $15 per hour, will trigger increases in wages overall. After several years or longer of Millennials working to pay-off their education loans, their financial situation will eventually improve and allow for them to qualify for loans. Until this happens the millennials will continue to be the renter generation and this is why investing in apartments and multi-family properties makes sense.
Originally posted by @Joe Bertolino :
They will get married, move to the burbs and have babies just like everybody else... but they will be a little older than prior generations when they do it.
I agree, but the sad part is that by delaying the purchase o their first home, they miss out on a lot of years building wealth. Being just 5-10 years behind will mean a huge difference.
For example, I did not buy my first property until I was 34 years old. My friends who had bought personal residences 10 years prior theoretically could have built up a substantial bit of wealth/equity. Of course we know that isn't what happened. Most of my friends who bought 10 years ago (2005) are still upside down, or took a short sale to get out. A couple had their homes foreclosed.
Good post. I also see the opposing forces of a transitory work force that moves to where the jobs are with the ability to work from home...
I'm not sure what that means, but I feel like owning SFR's is a good way to hedge those trends.
I wouldn't mind a stable renter that ran a 3D printing empire out of the garage of one of my houses (as long as they keep it tidy ;))
I just posted a new topic from my newsletter, enjoy.
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