Demand for apartments throughout the United States soared 11 percent in the second quarter year-on-year, driven by millennials that seem to prefer renting to the traditional American dream of owning one’s own home. Affordability is a major deciding factor among millennials.
A record 82 percent of renters now believe renting is more affordable than owning, said a new survey from Freddie Mac, the government-owned corporation that buys mortgages and packages them into mortgage-backed securities. That’s a huge jump from just a year ago when only 67 percent had this opinion.
“Affordability remains the essential factor when it comes to determining whether to rent or purchase a home, and the cost of housing is having a significant impact on households of every age, size and location,” said David Brickman, Freddie Mac president and CEO.
“For millennials and many Gen Xers, buying a home is no longer just a decision based on housing and housing costs.”
Brickman also said the rising pressure to repay student loans plus the rising cost of child care is having a significant impact on the decision by millennials to rent and not own.
In other words, millennials aren’t earning as much as GenXers. This bizarre statistic, again confirmed by a study released in February 2018, reveals that millennials on average make 4 percent less than people in Generation X did when they were the same age.
This report from Resolution Foundation analyzed earnings in eight high-income countries. It also found GenXers have a 54 percent pay advantage compared to the Baby Boomer generation before it.
Millennials were born between 1980 and 2000. GenXers were born from 1966 to 1980.
Freddie Mac said rental demand is highest in the largest cities. Dallas/Fort Worth, Chicago, Houston, New York City and Washington, D.C. top the list of favored apartment sites.
Data about millennials favoring renting “this year have been off the charts,” Toby Bozzuto, CEO of The Bozzuto Group, told CNBC. The Bozzuto Group specializes in building apartments, houses, and student residences for universities.
It currently has over a billion dollars worth of residential, Class A construction in the works across the North and Southeast.
Millennials are among the leading group of Americans that are making extra money from side hustles, according to a Bankrate survey. A group of young people are pictured on May 5, 2017 working on their website at a startup company in Shanghai, China. Photo: Johannes Eisele/AFP/Getty Images
On the other hand, Bozzuto believes millennials will ultimately aspire to have homes down the road.
“I think it’s still the American dream, but I call it the dream deferred and it’s deferred because of student loans, the lack of having a large amount of equity, and they also enjoy flexibility versus fixity,” said Bozzuto.
He also said millennials like a sharing economy.
“They use Uber instead of their own car, so apartments appeal to their needs, flexibility and their desires.”
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