A significant share of current renters now say they will never be homeowners, according to a survey of 7,000 renters from RentCafe.
Also, one in 10 renters were ready to buy a home this year, but the pandemic forced 43 percent of them to delay their homeownership plans.
Some survey highlights:
- Things were finally looking up for Gen X and older millennial renters, of whom 15 percent and 14 percent, respectively, were confident they’d become homeowners by the end of the year.
- As 43 percent of would-be home buyers changed their plans due to the pandemic, “economic uncertainty” and “loss of income” were the most cited reasons for delaying homeownership.
- As many as 50 percent of older millennials were forced by the crisis to let go of their dream, followed by younger millennials (43 percent) and Gen Xers (42 percent).
- Considering the current market conditions, “We asked renters about when they would finally be able to buy a home; while 56 percent were optimistic about becoming owners in the next 5 years, a significant 23 percent said that they’re never buying,” the survey says.
- Millennials were most eager to buy a home soon, particularly the older cohort, with 68 percent of older millennials planning to become homeowners in the next 5 years. Long-considered renters-at-heart, this cohort is now set on making the transition.
- On the other side, half of baby-boomer renters expressed no intention of ever buying again, as they seem to be getting more and more comfortable with renting.
Renters not buying homes
Doug Ressler, manager of business intelligence at Yardi Matrix, had these answers to questions posed about the survey:
Q: What one piece of advice would you give to Gen Zers and younger millennials who want to become homeowners sooner?
A: The buy vs. rent analysis is partially financial and partially emotional. The financial part of the analysis is difficult to work out because of future assumptions. However, one also needs to understand the level of risk and flexibility that come with each option, as well as individual desires, before making a purchase-vs-rental decision.
Q: There’s a large share of renters who think they’ll never become homeowners. Why is that?
A: When it comes to the complexities of real-estate investment, personal finances, and future economic time horizons, the conventional wisdom of buying being better than renting does not always hold true.
Many renters don’t think that they’ll ever own a home because they might not be able to afford the additional expenses that come with this decision, such as interest, property taxes, insurance, and maintenance for the entire ownership period. On the other hand, renting consists only of monthly rent and a possible one-time deposit; therefore, economically, renting might make more sense than buying a home.
Q: In your opinion, what is the No. 1 reason millennials, Gen Xers, and boomers do not purchase a home, renting instead?
A: As more millennials are moving up the earnings ladder, get married, and start families, housing is increasingly taking center stage. Although they have a higher number of graduates than Gen Xers and baby boomers, they are less likely to own a home. Some of the barriers to homeownership could be delayed marriage, student debt, and choosing to live in high-cost cities.
Q: Is it a good idea to buy a home now? In which cities?
A: This would depend on financial considerations and the targeted area of purchase. In more than half (59 percent) of housing markets nationwide — 442 of 755 U.S. counties — renting a three-bedroom property is now more affordable than buying a median-priced home.
The lowest median home prices would be in the Houston metro area, Orlando metro area, or Chicago metro area, all three of which boast a high percentage of millennials.
Doug Ressler is the director of business intelligence at Yardi Matrix, where he is responsible for the creation of business and statistical research models for the commercial real estate industry. Previously, he was an analyst at the multifamily market research company Pierce-Eislen. He holds a master’s degree in business administration from Arizona State University and a bachelor’s degree in business administration from Pennsylvania State University.