Higher-income millennials are renting homes instead of buying as they are being priced out of the overly competitive real estate market as prices continue upward.
Thus, the higher-income millennials lead the ranks of “lifestyle renters,” according to a new study from RentCafe.
“The share of applications for apartments from renters who earn more than $50,000 is at its highest level in five years, 39 percent, as many would-be homebuyers were priced out of an overly competitive real estate market in 2021,” RentCafe says in the report.
Rapidly rising housing prices and bidding wars have pushed up the number of people who have decided to rent despite having the income to buy a home.
“This year’s rental applicants are making on average 10 percent more than those who moved last year, the equivalent of $4,300 more in annual wages. Of all renter groups of typical home-buying age, the share of millennials with incomes greater than $50,000 saw the fastest increase in 2021 — a significant 20 percent more than in the previous year,” the report says.
Higher-income millennials becoming lifestyle renters
The growing percentage of lifestyle renters is due, in part, to many millennials realizing that the benefits of homeownership don’t outweigh the difficult path to get there, says Noah Echols, vice president of marketing at Carroll, a national real estate investment company.
“Housing prices have been rising for years, making it more difficult for renters to transition into homeownership,” Echols said. “Student loan debt has also increased, making it difficult for young people to save for a down payment.
“Previous generations put an emphasis on homeownership as a marker of achievement for an adult. Lifestyle renting has been normalized by millennials, removing the pressure to purchase a home in order to feel successful,” Echols said.
Large cities with highest increase of high-income millennial renters
Compared to 2020, there are now 51 percent more millennials in the $50,000 or more income bracket who applied for rent in Indianapolis, IN., where the individual median income grew by 11 percent since last year, further solidifying Indy’s status as an emerging job hub and increasingly attractive spot to call home.
Across the country, surging home prices make lifestyle renting in Las Vegas a viable option for many. The share of rental applications among upper-income millennials went up 43 percent year-over-year. Notably, a large portion of these renters were recent transplants, particularly from neighboring California, for whom Vegas offers more space at a more affordable price while working remotely and waiting out the pandemic.
Phoenix also continues to be an attractive relocation destination, especially for millennials. This year, Phoenix had 39 percent more rental applications from millennials who earn more than $50,000. As home prices encourage members of this generation to embrace renting, Phoenix is ready to meet the demand, thanks to a surge in new apartments delivered in 2021 alone.