Millennials content to rent — for now
Sam Lustgarten could be one of the growing number of “career renters” real estate companies think Millennials will become — at least in the near term.
The 24-year-old Ph.D. student at the University of Iowa in Iowa City lives in campus housing for about $490 a month, and plans to continue doing so until he finishes his program in counseling psychology in five years. At that point, he’ll have close to $60,000 in loan debt. Right now, he says, he can envision renting for the rest of his life.
“I don’t want to take on more debt,” he says. “I don’t want to have another credit check; I don’t want to talk to another set of bankers; and I don’t want to put so much liability on the line.”
For many Americans hard hit by the recession or dealing with large student loan debt, the idea of renting indefinitely has become appealing. No mortgage to pay off, a living space that comes with built-in amenities, and a landlord who takes care of upkeep and maintenance.
This may be particularly true for the country’s youngest adults, who are delaying homeownership and for whom taking on a mortgage is seen as one more debt to pay off. From 2006 through 2011, 25- to 34-year-olds experienced the largest decline in homeownership compared with any other age group, according to a USA TODAY analysis of Census Bureau data. Among households headed by 25- to 34-year-olds, renters increased by more than a million from 2006 to 2011, while the number who own fell nearly 1.4 million, the analysis shows.
Today’s young adults are not only delaying homeownership, they’re delaying many of the life events that often come with homeownership, including marriage, children and settled careers. The flexibility to be able to pick up and leave an apartment building or city for a job can be crucial.
Not attached to owning
For C.J. Wetzler, the decision to rent long term is motivated as much by finances as by lifestyle. The 30-year-old says his salary as a high school science teacher makes buying a place unrealistic. But he says flexibility is the biggest factor in choosing to continue renting after recently moving from West Palm Beach, Fla., to Coconut Creek.
“I feel at ease knowing if I had to relocate, the process would be less complicated,” Wetzler says.
But like Lustgarten, he’s averse to putting himself in a financial bind. “I know a house can be an investment, but I’m not looking to go $100,000 in debt with a teacher’s salary.”
Real estate companies say they’ve noticed rental residents are now more often single, older and staying longer than in past decades. And those who do move out are more often moving to another rental over buying a home, says Mark Obrinsky, chief economist for the National Multi Housing Council, a group that represents apartment firms.
Obrinsky says the trend makes sense given Millennials’ affinity for renting just about everything else, from cars like Zipcar to clothes through sites like Rent the Runway.
“A lot of young people don’t have the same attachment to ownership of anything,” he says.
An iffy job market has continued to permeate other aspects of Millennials’ lives, especially where and how they live.
“They entered the job market when it was harder to find a job, and the effects of entering the labor market when jobs are scarce are long term,” says Jed Kolko, chief economist at real estate site Trulia.
Pierre Calzadilla, a spokesman for Trulia’s rental division, says he notices more people looking for roommates in Trulia postings.
To some extent, real estate developers anticipated this trend, and started offering rental units in locations attracting young professionals to meet demand, often equipped with high-end amenities such as roof-top pools, gyms, brand-new kitchen appliances and social events for the building.
“I think they are embracing the social lifestyle of high-density urban living,” says Equity Residential CEO David Neithercut.
Still, many housing-industry leaders insist the desire to become a homeowner has not diminished, even among Millennials. A Trulia survey conducted in June found that 94 percent of renters 18-34 plan to buy a home someday.
Others admit they just don’t know which way the rental trend will tip as young adults age and start families.
“I think that they believe that whatever their American dream is,” Neithercut says, “it can be fulfilled without owning a home.”