The newsLINK Group - Changing Rental Demographics
Editorial Library Category: Multi-Family & Property Management Topics: Rental Demographics Title: Changing Rental Demographics Author: newsLINK Staff Synopsis: In the U.S., millennials are now the largest generation. Experts disagree about the beginning and end of the millennial generation, but most count the period that started early in the 1980s and ended in the early 2000s. Their numbers surpassed those of the baby-boom generation when they hit 83.1 million in 2015. Two-thirds of millennials, or 55.4 million of them, rent their homes. Editorial: Changing Rental Demographics 4064 South Highland Drive, Millcreek, Utah 84124 │ thenewslinkgroup.com │ (v) 801.676.9722 │ (tf) 855.747.4003 │ (f) 801.742.5803 Editorial Library | © The newsLINK Group LLC 1 In the U.S., millennials are now the largest generation. Experts disagree about the beginning and end of the millennial generation, but most count the period that started early in the 1980s and ended in the early 2000s. Their numbers surpassed those of the baby-boom generation when they hit 83.1 million in 2015. Two-thirds of millennials, or 55.4 million of them, rent their homes. At 51 percent of the market, those who are less than 30 years old are already dominating the rental market throughout the U.S. During the Great Recession, experts at Freddy Mac estimated that 3.9 million households did not get formed when they normally would have because of a lack of credit, low wages, unemployment, and other factors. This information was in a report titled Multifamily Mid-Year Outlook 2015 . Most of those households would have consisted of millennials. Where did they live instead of their own place? They chose to live with friends or family until their financial outlook improved. Now that the economy has improved, that pent-up demand for households is beginning to become a reality. Freddy Mac thought the U.S. would need approximately 440,000 new multifamily units between 2015 and 2025 to meet the growing need. (To see the current rate of household formation, with estimates from the Census Bureau for the year-over-year changes, visit ycharts.com/indicators/us_household_formation. ) Nothing has happened that would change the need for more multifamily units. Many millennials still lack the financial resources at this point in their lives that would allow them to buy homes and settle down. A report published by Fannie Mae in August 2015 titled National Housing Survey: Millennials Look to Income Improvements as Key to Unlocking Homeownership said that 62 percent of renters who were then between the ages of 25 and 34 thought it would be hard for them to get a mortgage. The barriers they saw included the following: Salaries that were too small Inadequate credit scores Inadequate savings Too much debt To buy a home, most millennials would typically need a down payment of 5 percent and enough money to cover the closing costs. Most millennials do not have that kind of cash on hand. In addition, the savings rate for those under 35 is currently an abysmal –1.8 percent. For many, millennial debt comes primarily from costs associated with school. Student loan debt in the U.S. was at $1.3 trillion in 2015. Between 2003 and 2013, student loan balances for 25-year-old borrowers almost doubled. Experts don’t know whether millennials are paying down existing debts or acquiring new ones, but either way, millennials are often in no position to even think about buying a home yet. At the same time, they don’t want to live with friends and family indefinitely. What is the logical answer to the question of where to live? It’s renting. Although millennials have not yet gained the kind of wealth they will need before they can buy a house, that doesn’t mean they never will. In addition to their own efforts over time, their parents are aging. They stand to inherit a respectable amount of wealth. Choosing where to live isn’t just a matter of money, however. Millennials are big on lifestyles that emphasize mobility and favor new experiences over materialism. Two-thirds of them would rather live in the city in a mixed-use community than in a traditional home with, say, a white picket fence. They know urban prices are high; for the locations that interest them, they think the only way to be able to afford living there is by paying rent. They are often right. What are the keys to attracting the millennial market? Using mobile technology to help millennials find rental opportunities. This is a generation that usually has their smartphones close by: in their hands, in their pockets, or in a bag. They use search engines all the time.
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