Some Millennials will rent forever, and student debt is partially to blame.
According to a new Apartment List study, 12.3% of current Millennials plan to be “forever renters.” That number is rising, up from 10.7% in 2018.
In some metro areas, nearly 1 in 5 Millennials plan to rent forever. In New York City, for example, 15% expect to rent eternally.
The greatest obstacle between Millennials and homeownership is affordability, notably getting together the 10 to 20% down payment. This is even more difficult in expensive major cities such as San Francisco and Los Angeles. For those Millennials who aspire to buy, a full 70% are waiting for reasons related to cash flow.
For many Millennials who do want to purchase a home someday, it remains a pipe dream. Over a third (35%) haven’t started saving towards a down payment.
Apartment List’s 2019 Millennials & Homeownership Report surveyed over 10,000 Millennial renters in the United States.
Entwined with the lack of affordability is student debt. Right now, 57% of college-educated Millennials report outstanding student debt. Meanwhile, those without such debt are able to save an average of $100 each month, which could ostensibly be saved for a down payment.
The student debt crisis divides Millennials into the haves and the have-nots.
In the last year, 48% of Millennial renters who want to buy a home had no savings at all for a down payment, while 31% had a paltry $5,000 or less.
At that rate…
Across the nation, the study estimates that only 25% of renters who are Millennials will be able to afford a 10% down payment within the next 5 years.
While homeownership is part of the American Dream, it should be said that Millennials are used to renting everything in their lives, now more than ever. Renting has become part of their day-to-day: they rent not only dress-up outfits but their daily wardrobe from Rent the Runway, they rent strangers’ houses via Airbnb when they go on vacation (and maybe rent their own apartments when they go away themselves), they take ride-share services instead of owning a car. No one needs to worry about office space anymore when you can rent a desk from WeWork or one of its many competitors.
“Forever-renting” might sound grim to their parents, but it’s a lifestyle Millennials are used to. Perhaps renting well into their lives won’t have the stigma that it did for generations older than them.
Hard to catch up
Overall, it appears that Millennials will have a hard time catching up to previous generations when it comes to homeownership – especially if the trade war with China and other economic factors pushes the country into a recession.