The housing sector is keeping a close eye on the nation’s largest generation — Millennials — who are in their prime homebuying years but face affordability challenges that previous generations did not experience. The situation doesn’t appear to be improving for Generation Z, an Apartment List analysis said.
Adults between the ages of 29 and 44 are responsible for a substantial share of home purchases during the past year, according to Census Bureau data, but on a per-capita basis, Millennial homeownership is growing at a slower rate than previous generations. Millennial homeownership was 47% last year, compared with 74% of Baby Boomers and 65% of Generation X who are homeowners. Homeownership among the silent generation stands at 70%, as many of this generation are selling their homes to live with younger relatives or moving to assisted living facilities, said the Apartment List analysis. Only 9% of Gen Z own homes.
“While Millennials have developed a unique reputation for struggling in the housing market, their situation is not new,” said the report. “In fact, they are the third consecutive generation to purchase homes slower than the preceding generation.”
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By age 30, 55% of the silent generation owned homes, compared to 48% of Baby Boomers, 42% of Gen Xers, and just 33% of Millennials, said the analysis.
The Great Recession was a significant stumbling block to homeownership for Millennials, many of whom were graduating from college and starting careers when the housing market collapsed. As the economy recovered, home construction shifted to urban multifamily apartments and Millennials drawn to jobs in centrally located cities found renting to be more financially beneficial than buying starter homes, which were becoming increasingly scarce and expensive, said the report. Gen X also suffered the impacts of the housing market collapse, as many of them had purchased homes that eventually went into foreclosure. As such, the Gen X homeownership rate flattened.
More recently, young homeowners have been shifting away from dense, expensive cities toward smaller, more affordable areas. The Millennial homeownership rate is 52 percent in the non-metropolitan parts of the country but just 35 percent in the nation’s largest urban markets, said Apartment List.
The housing market has adapted to these homeownership trends as evidenced by the booming built-for-rent sector that delivered more than 100,000 single-family rental homes last year.
“In this way, rapid home price growth and low Millennial and Gen Z homeownership are proving to be a tailwind for the rental industry, which has enjoyed steady demand from many young adults who are priced out of homeownership and instead living in rentals for longer,” said the analysis.
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Kristen Smithberg
Kristen Smithberg is a Colorado-based freelance writer who covers commercial real estate, insurance, benefits and retirement topics for BenefitsPRO and other industry publications.
