Next Generation of Landlords

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Next Generation of Landlords

Key Takeaways

  • Millennials also constitute 53% of new home mortgages in the U.S. in 2020, rising from 49% in 2019.
  • Millennials have been the largest share of home buyers since 2014.
  • Millennial homebuyers prefer suburbs over cities with about 47% of millennial homeowners living in suburbs in the U.S.
  • 77% of Americans prefer to rent a house instead of buying a home.

Introduction

This report provides insights into who the next generation of American landlords are. We have included a demographic analysis of this next generation and identified trends in the U.S. home rental market as regards the preference of Americans to rent a home and stay longer or to buy a home.

Millennials Quickly Becoming the New Generation of Landlords

  • According to a 2021 publication by the National Association of Realtors (NAR), "millennials have been the largest share of home buyers since the 2014 report."
  • Millennials also constitute 53% of new home mortgages in the U.S. in 2020, rising from 49% in 2019.
  • According to the report by NAR, 37% (14% younger millennials and 23% older millennials) of new home buyers in the U.S. are millennials. Young millennials are those aged between 22 to 30 years while old millennials are those aged between 31 to 40 years.
  • This is coupled with the fact that a publication by Forbes in 2019 suggested that millennials are in line to become the wealthiest generation in the history of the US as they are set to inherit their parents' (baby boomers) wealth. With baby boomers regarded as the wealthiest generation in the U.S., it implies that more and more millennials are expected to become affluent from inheritance.
  • By 2030, millennials are expected to inherit over $68 trillion from their baby boomer parents which will make them five times richer than they are today.
  • According to a 2019 report, there are 618,000 millennial millionaires in the U.S., representing just about 2% of the total U.S. millionaire population. This percentage is expected to change sooner rather than later.
  • "The majority of millennial millionaires have a net worth that ranges from $1 million to $2.49 million and falls between the ages of 34 and 37. Due to inheritances, trusts, and estate planning, there will be a steady flow of Millennials getting very rich soon. Since the Millennial generation is smaller than the Boomers they're inheriting from, the wealth handed down will be highly concentrated."

Demographics of the New Generation of Landlords: Millennials

1. Household Income
  • The report by NAR found that the median household income of millennial homebuyers in the U.S. is $80,000 for young millennials and $105,600 for old millennials.
2. How Much They are Spending on Buying Homes
  • NAR reports that the median price spent by young millennial homebuyers in the U.S. is $229,000. Old millennial homebuyers spend a median price of $300,000 to buy a home.
3. Where They Are Living
  • Forbes reports that millennial homebuyers are choosing to move to suburbs over cities with about 47% of millennial homeowners living in suburbs in the U.S. according to a report by Zillow.
  • NAR report hints that more than half of young (52%) and old (54%) millennial homebuyers prefer to purchase homes in suburbs/subdivisions.
  • According to a report by LendingTree, "Minneapolis; Buffalo, New York; and San Jose, California, are the metros where Millennials make up the largest percentage of purchase requests. In Minneapolis, 56.2% of purchase requests came from this generation. In Buffalo, New York, and San Jose, California, the numbers are 56.1% and 55.8%, respectively." Tampa, Las Vegas, Miami, San Francisco, Los Angeles, and Detroit are other cities millennials home buyers are choosing.
  • The need for a bigger and updated house was cited as a possible reason why they are choosing suburbs instead of urban and rural areas.
  • "Home affordability, employment opportunities, flexibility to work remotely, local tax rates, and preference for open spaces" were also cited by Corelogic as factors that inform their decision on location.
4. Marital Status
  • 51% of young millennial homebuyers are married couples compared to 20% that are unmarried couples. 16% are single females while 11% are single males.
  • For old millennial homebuyers, 69% are married couples, 10% are unmarried couples, 14% are single females, and 7% are single males.
5. What Type of Homes are They Buying
  • Detached single-family homes are the most preferred type of home purchased by both young (81%) and old (88%) millennial homebuyers. This is followed by townhouse/row house at 11% and 7% for young and old millennial buyers respectively.
  • Duplex/apartment/condo in 2 to 4 unit building are the least preferred with just 1% and 2% preferring it for young and old millennial buyers respectively.


Trends in the U.S. Rental Market

  • According to multiple reports, there is a seeming preference of Americans to rent a house to buying one. NY Times reports that 108.5 million Americans are renters with single-family homes making up 35% of U.S. rentals.
  • A survey by The Zebra on 1,500 Americans found that 77% prefer to rent a house instead of buying a home. However, only 37% of renters have renter’s insurance.
  • 49% of renters in the U.S. are under the age of 30.
  • The report also hinted that "there are more people renting now than at any point since 1965."
  • Every day, there are about 2,654 new renters in the U.S. with 17% of renters preferring to live in a duplex.
  • Although 80% of millennials would like to own a home at some point, 18.2% of millennial renters plan to “always rent.” This percentage has risen from 12.3% in 2019 and 10.7% in 2018.
  • Nearly three-quarters of millennials rent. Down payment and student loan debt are some factors hindering millennials to own a home.
  • While most millennials are planning to rent for eve because they can't afford to buy a home, some millennial renters (40%) still prefer to rent because of the flexibility it offers and also to avoid the added costs of homeownership.

Research Strategy

To provide an analysis of the next generation of landlords in the U.S. and identify trends in the U.S. home rental market, we relied on articles and publications from the most reputable sources such as Forbes, CNBC, NAR, and others for this report.

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