Why Millennial Homeownership Is At A Record Low: What Real Estate Investors Should Know

Millennial homeownership is historically low. According to the most recent Census data, about 49% of millennials own homes. It's become a national pastime or running gag to blame the millennial generation for killing different industry types. Or they are chalking up the low millennial homeownership to avocado toast and overpriced pumpkin spiced lattes. 

In this article, we give an overview of the struggles that millennials face. Also, we cover how you, as a real estate investor, can benefit from understanding their plight. 

Millennial Homeownership Is Historically Low

Millennials want to own homes but can't afford the price tag. More than 75% of millennials still view homeownership as part of the American Dream. But, a growing number (more than 20%) believe they will never own a home and will be eternal renters. 

Millennial homeownership is much lower than the rate of 26-41-year-olds of the past. There are reasons beyond any person's control for that. 

Several factors characterize the low rates of millennial homeownership:

All these factors combined are squeezing millennials as they enter the financial prime of their lives. But the issues are forcing many millennials to delay marriage, kids, and homeownership. 

First-time home buyers are in a disadvantageous position; home prices are to the moon; mortgage rates are spiking. Low wages and debt make wealth generation more difficult. These realities form the perfect storm for low millennial homeownership rates. 

America has become a much more difficult place to secure an affordable mortgage. "First homes" (single-family homes, even multis under $250,000) make up less of the market than ever before.

After the 2008 crash, real estate investors scooped up hot deals on all kinds of properties, enjoying a single-family budget property free-for-all. By now, most investors have upgraded these homes, upsold them, or maintained them to be competitive in today's market.

That means the homes are worth more than appreciation alone. Yet, it's the same asset investors got cheap after the crash. Millennial tenants are now more likely to become lifelong tenants instead of purchasing their own homes. It's bleeding down into Generation Z too. They're the generation with the most people in crisis. As a whole, they're the generation struggling to transition from renters to buyers. 

Yesteryear's Stats Don't Apply to Millennials: What REIs Need to Know About This Population

Even assuming 18-35 years olds are still the "homebuying age group" is foolish and inaccurate. Ask any 18-year-old how likely they are to own a home soon. Seriously. Any college student, even. The American Dream of homeownership isn't dead, but it's on life support.  

Millennials faced a different world: 

These factors present difficulties and challenges that prevent millennial homeownership.

Renting is often tricky. Millennials are more likely to move in with their parents than any other generation. Many in their 20s and 30s move home under financial duress, while others lack that option and live with housing insecurity.

These problems are natural barriers to home ownership. We haven't even delved into this generation's many cultural crises. Everything from later marriage age to the ongoing opioid crisis that continues to rage through mid-2019 can affect how this population rents and buys.

Why Millennial Homeownership Trends Matter for Real Estate Investors

Most investors count Millennials among their tenants or desired demographic. Single-family investors and those starter homeowners can stand to benefit in a seller's market. While the housing market has cooled somewhat, there are still ways to benefit from understanding your tenants. 

Millennials as tenants

As millennials learn that homeownership is just one path to building wealth, their preference for renting may align with your investment goals. Attracting and keeping these tenants is essential. 

You want consistent rental income, spend less time preparing a unit for rent, and avoid uncertainty with a new tenant. To keep your millennial tenants, consider: 

In general, Millennials are well-educated and tech-driven. For them, home prices, supply chain issues, and low cash reserves have made renting a certainty for the foreseeable future. Typically, a well-educated, employed tenant is an ideal tenant for you to have. 

Millennial homeownership as an exit strategy for you 

Millennials want to buy a home. That desire may provide you with an exit strategy. It's not all doom and gloom. A NAR report from March 2022 shows that millennials make up 43% of home buyers. Instead of McMansions, they are looking for good deals on properties and efficient use of indoor and outdoor space. 

If you have a property worth under $250,000, you're sitting on a high-demand property. Millennial buyers are competing, and investors can play fair while profiting.

Key Takeaways

Millennials sometimes turn to real estate investment to "escape" debt or employment barriers. Knowing this group's challenges helps you relate (or understand the real estate issues if you're a Millennial) to life and business. All real estate investors benefit from understanding their Millennial tenants, partners, and fellow investors' struggles. 

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Why Millennials Aren't Buying Houses

Blaming millennials for everything has become a national pastime. One problem with cultural assumptions about entire demographics of people is these assumptions can water down or outright mislead our understanding of the real issues we're facing.

Like it or not, millennials’ habits will dictate real estate trends over the coming years. As real estate investors, we should be mindful of broader trends in the market and population. 

Millennials Are Record Low Home BuyersMillennials Set Record For Lowest Home Ownership

Folks born between 1981 and 1996 aren’t buying homes at the rate of generations before them, but not necessarily by choice. The real estate deck is stacked against first-time homeowners in a manner unprecedented in collective memory. America has become a much more difficult place to secure an affordable mortgage. “First homes” (single family homes, even multis under $250,000) make up less of the market than ever before.

The reasons come directly back to us investors. After the 2008 crash, we scooped up hot deals on these kinds of properties, enjoying a single-family budget property free-for-all. By now, most of us have upgraded these homes, up-sold them, or at least maintained them to be competitive. But that means the homes are worth more than appreciation alone would account for. Yet it’s the same asset we got cheap after the crash. Fast forward to the present day, and our prospective 18-35-year-old tenants? They’re the generation with the most people in crisis, struggling to transition from renters to buyers

Yesteryear’s Stats Don’t Apply: What REIs Need to Know About Millennials

Assuming people under 40 are still the  “home-buying age group” is foolish and inaccurate. Ask any 18-year-old how likely they are to own a home in the near future. Seriously. Any college student, even. Those who aren’t laughing uncontrollably may conservatively guess a decade. 

Millennials face a different world: student loans and debt are all but certain for those beginning 4-year college. This generation’s unique challenges include:

Millennials are also more likely to move in with their parents than any other generation. Many in their 20s move home under financial duress, while others lack that option and live with housing insecurity.

Taking these problems seriously shows how such factors are genuine barriers to home ownership. We haven’t even delved into this generation’s many cultural crises. Everything from later marriage age to the ongoing opioid crisis that continues to rage through mid-2019 can affect how this population rents and buys.

Why These Trends Matter for Real Estate Investors

Most investors count millennials among their tenants or desired demographic. Single-family investors and those starter home owners can stand to benefit in a seller’s market. Or, they can stand to lose if they command a rent that’s not practical for the area. 

If you own such an asset in an unfamiliar market, learning the employment situation can give you tons of insight into prospective tenants.  If you have a property worth under $250,000, you’re sitting on a high-demand property. Buyers are competing, and investors can play fair while profiting.

Millennials sometimes turn to REI to “escape” debt or employment barriers. All real estate investors could benefit from understanding the struggles their millennial tenants, partners, and fellow investors face. 

How the SECURE Act Weakens 401(k) Protections (& What You Can Do)

It’s hard to deny that one in five Americans not having put a single cent towards retirement is a social problem. But the policy solution Congress is enacting to address this issue may affect your 401(k).

As investors, we love the 401(k), the 1978 amendment in the Tax Code that quickly became one of America’s favorite retirement savings vehicles. But Congress is actively changing your 401(k)s legal protections. We’re not letting any of our readers get blindsided by changes in law. Unfortunately, the well-intended GOP bill with the stated goal of encouraging more Americans to save has real consequences that threaten all account holders.

Here’s what the folks in Washington are up to, and why some policy experts and scholars fear the 401(k) will be ultimately weakened and undermined by the SECURE Act.

Summer of Savings or Losses 2019? Congress’s SECURE Act Threatens 401(k) Protections

As of August 1, 2019, the Setting Every Community Up for Retirement Enhancement (SECURE) Act passed the House of Representatives. “Passed” is actually an understatement, given the bill flew through the House with a landslide 417-3 vote in favor of passage. We feel current projections anticipating a similar cruise through the Senate are likely accurate, and time will tell.

That said, keep in mind a bill can change substantially in the days, even hours, before its passage. Whether it’s amended in committee, filibustered, or provisions shuffle in and out at the last minute, there are many ways a bill can change in the moments before it becomes law. There is a distinct possibility that the bill at the time of this writing won’t be the exact version that passes, so confirm any effects you expect to personally impact your retirement plans.

Now’s a great time to remember that not every legislator reads or fully endorses every item in every bill they pass. Doing so takes hours of specialized time. So often, tucked within popular provisions are smaller edits and amendments that can actually make a massive impact if they become law. The changes to 401(k) protections are simply an example of this phenomenon.

For more information, see our article, How The SECURE Act Impacts Inherited IRAs.

Your IRA’s Not Safe Either: Certain Beneficiaries Can Kiss Stretch IRA Strategies Goodbye

The long-beloved stretch IRA is no longer a viable strategy for children of IRA beneficiaries. The  conventional estate planning and asset protection wisdom that has historically worked in these cases must change with the law. Even our attorneys used to recommend stretch IRAs for child beneficiaries, who are now excluded from stretching IRAs along with other non-spouse beneficiaries.

Fortunately, there are reasonable accommodations for certain situations, such as beneficiaries with chronic illnesses or disabilities or beneficiaries within 10 years of the decedent’s age, but otherwise, if you are the beneficiary of an IRA, you have to take your distributions within 10 years now. You no longer can rely on the stretch method to spread a large IRA over a lifetime, a tactic long used to preserve wealth within families.

Now, you have to use it within a decade or lose it.  

Update Your Estate Plan and Asset Protection Strategies to Account for New Changes

The best way to prevent any of SECURE’s possible negative effects in your own life is to plan around them. Keep eyes on the law, especially in its final form, and don’t be afraid to ask your own trusted professionals about possible impacts on either your asset protection strategy or estate plan. After all, the two are linked.

Given we can no longer fully endorse the same-old 401(k) asset protection advice, we encourage investors seeking alternative asset protection vehicles to consider forming a living trust to address estate planning needs. This flexible vehicle remains unaffected by these legislative changes.

Most Americans who participate in 401(k) plans will likely need to make some adjustments to their estate planning, and some may opt to change course in their retirement savings altogether. Whether changes will drive Americans away from the enduring 401(k) or legitimately promote access to retirement accounts is a policy question that only time will answer.

When Discussing Your Estate Plan: What To Do With Your Remains

One of the major decisions you will make as a part of your estate plan is how you want your remains handled. Some approach this as a matter of disposal, others as an opportunity for preservation of their legacy. But the options are only getting more interesting if you’re willing to think outside of the box on this issue. For the sensitive readers, if frank discussion of death and the natural processes that accompany it makes you uncomfortable, maybe now would be a great time to check out this excellent estate planning article instead.

Still with us? Let’s get right into the nitty gritty details of some of the more novel approaches to memorializing human remains. If this news story seems a little too intense for you, check out one of our previous estate planning news pieces on celebrity deaths.

Human Composting: Return to the Earth and Create New Life

The idea may seem distasteful on the surface, but stick with it for a moment. Are cremation and burial any more glamorous? With exceptions for religious variation, most folks are fine with burial, an essentially wasteful process (absent other altruistic actions like organ donation, a very cool thing) that involves a return to the earth from whence we all came. But what if your body could continue to provide life as part of a greater ecosystem as a part of that process? Well, it can if you use a human composting service. 

While there are multiple specific methods for human composting, the process involves using natural and biodegradable materials to encourage the remains’ reintegration back into the earth. Some companies use funguses or mushrooms, while others may use a variety of organic materials.

Is Human Composting Legal?

Location will determine if human compositing is a possibility for your own estate planning needs. Those with a specific plan for where they would like their resting place to be would be wise to research well in advance about the legalities of the issue in the relevant jurisdiction. Some, but nowhere near all, states and even smaller units of government have regulations requiring either burial or cremation. Generally, human composting is type of service that is legal where offered. Private providers of such services should be able to advise where they can and cannot operate. This area of law may change in the coming years as more advances in estate planning technology inevitably occur.

Washington was the first brave state to spearhead formal legalization of human composting, thus allowing an industry to flourish.

Why Would I Consider Human Composting or Other Burial Alternatives?

Burial is expensive. Very expensive. Somewhere between $8,000 at the most bare bones to $20,000 on average. Cremation can be cheaper but still runs comparable to the low end of burial. A representative of a major human composting company went on the record to confirm the price of their total service as $5,500.

If you find human composting isn’t as desirable for you, consider some of the other interesting burial alternatives that more Americans are embracing in part to combat end-of-life costs. The LifeGem is yet another memorial novelty, though this type leaves loved ones with a carbon-pressed gem made from the naturally-occuring carbon in your body. The result is a gem that can be mounted on jewelry or other keepsakes. What do you think of these more physically conservative memorialization options? Odds are good that trends that minimize costs and add meaning to the grieving process will have plenty of room in the estate planning market.

Stigmatized Property: True Crime, Real Estate, and Why Psychic Damage Can Create Great Deals

It’s always sad to see stories of cult and popular figures alike passing away in their homes. In March of 2019 alone, legendary California tattoo artist Lyle Tuttle, former Alaskan governor Keith Miller, and many lesser-known humble heroes whose names won’t make papers died at home. But have you ever wondered what becomes of homes associated with famous deaths?

What is a Stigmatized Property?

The phenomenon of property stigmatization is also known as “psychic damage.” It has nothing to do with the actual physical condition of the property in question. Psychic damage and stigma refer to far more subjective issues that may relate to beliefs about energy and “bad vibes.”

A common example of this type of damage is a home where a violent crime or suicide has taken place in the past. The former home of O.J. Simpson, where the controversial murder of Nicole Brown and another innocent took place, was one of the most notable stigmatized properties of the 1990s. While such homes occasionally rise in value for their infamy, this beautiful scene of an unforgettably brutal crime ultimately sold for under market value. According to the property’s appraiser Andrew Bell, who has handled many stigmatized properties including the home of JonBenet Ramsey, a crime will typically decrease the value of a property by 15-20%.

Crime isn’t the only cause of property stigma. Homes that were the scenes of suicides, natural deaths, notable accidents, or even homes tenants insist are haunted may be stigmatized too.

Do Homeowners Have to Disclose if a Crime Has Taken Place on a Property?

The answer depends on your state. Some states require owners to disclose many situations that could be stigmatizing, while others don’t require a disclosure at all. A competent attorney can explain state and local laws that apply to you.

Non-criminal events tend to be less legislated. But some jurisdictions may require the seller of a home to disclose tenant reports of hauntings, for example. Fortunately, we cannot be held legally liable for the actions of spirits and otherworldly beings that may hypothetically inhabit our properties.

Stigmatized Property Can Be an Investment Opportunity

The misfortune of the seller of a stigmatized property can often be the smart investor’s gain. Some investors explicitly seek out stigmatized property. Frankly, many people simply don’t care about a sordid history. What makes a home unlivable for the family looking for their first property may not even faze the investor. The subjective nature of stigmatized property can absolutely be exploited if you are willing to be open-minded, proactive and creative.

You can often find incredible deals on property with psychic damage of some type. You might even be able to find a steal in a state that requires disclosure of these incidents. A little bit of common sense goes a long way. The severity of the event, how long ago it occurred, whether it’s ongoing, and the fact that time can lessen the impact of tragic situations are all factors to consider. You may be pleasantly surprised by how motivated the sellers of these properties can be, but be sure to treat them with empathy and kindness. These sellers may have experienced a traumatic event themselves, after all.

If you’re considering purchasing such a property, it’s a good idea to speak with a qualified real estate attorney. You’ll want a lawyer’s opinion about whether you’ll have to make disclosures in the future, the legal requirements in your jurisdiction, and any other questions you have. This is true whether you’re in the buying or selling position.

How a Government Shutdown Affects the Real Estate Industry

The last government shutdown was the longest in history (December 21, 2018 to January 25, 2019).  Those who recall previous shutdowns know that “nonessential” federal personnel are hit particularly hard by these events. But many people ask us: Is real estate affected by government shutdowns?

During the last shutdown, the media focused on the roughly 800,000 workers who missed paychecks. But the ripple effect of a shutdown goes far beyond the federal government and creates waves in the private sector. The spending gaps can affect the real estate industry in significant ways.

Wise investors will be observing these trends, and to keep you informed, we’ve made some observations about the impact of a government shutdown on land trusts, real estate investing and more. Let’s dive in to exactly who in American real estate is affected—and how—when the country’s government is closed for business.

real estate affected by government shutdown

The Government Shutdowns Hit Landlords with HUD/Section 8 Tenants

Multi-unit investors, particularly owners of apartment complexes that cater to Section 8 or otherwise federally assisted tenants, may encounter problems directly tied to the shutdown. Sales of these complexes are likely to slow dramatically, but their landlords face bigger issues. The Department of Housing and Urban Development (HUD) has two main ways of subsidizing housing, one of which is contracting with landlords. Landlords with expiring contracts will not be able to renew them during the shutdown. Some 1,050 of these contracts, which cover an average of 52 tenants each, will expire in February while active contracts will be paid for the first 30 days.

A prolonged shutdown complicates many issues related to real estate. If payments are not made on behalf of the millions of Section 8 and HUD-sponsored tenants, landlords may face difficult choices about evicting these tenants for unpaid rent. Evicting a Section 8 tenant is a more complex process for all involved (landlord, tenant, and court) than a standard eviction, and evicting many at once even moreso.

Owners of public housing may also experience delays with securing mortgages and loans.

Mortgage and Lending Difficulties

Investors and other homebuyers nationwide are already being affected by the shutdown’s impact on lending. Right now is a more difficult time to secure a mortgage in general. Certain small business loans are not available during a shutdown, which could be problematic for small business owners in any sector. Of these, the Small Business Administration has a substantial backlog already, with some experts noting that nearly $2 million in loans have yet to be approved. Fair Housing Act (FHA) loans are still being issued but may be delayed.

Some prospective lenders have already experienced delays. Many private lenders who rely on our friends at the IRS to verify potential borrowers’ income were stalled out. During the early weeks of the shutdown, the income verification service was unavailable.

Professionals Can Help Real Estate Investors

In a turbulent market, the opinion of a qualified real estate attorney can help clarify how broader market trends affect you personally. To learn more about what you can do to keep your real estate holdings defended in any climate,  schedule your personal consultation today.

Real Estate News: Demand for Furnished Rentals Soars Nationwide

By the summer months of 2018, real estate journalists in major metropolitan areas began noticing that demand for furnished rental property was up. The phenomenon was not a fluke to particular geographic area, but present in cities across America, particularly those experiencing substantial growth or economic development.

What is driving this trend? And most importantly, is offering a furnished rental a strategy you may want to consider? Read on to learn more about the furnished rental market’s possibilities.

Why Furnished Rentals Are Growing in Popularity

When many of us think of furnished rentals, we imagine short-term rental scenarios. While Airbnb and vacation rentals must be furnished to be functional, there is also demand for furnished long-term rentals.

While corporate housing has long been a source of tenants for furnished rentals, figures from July of 2018 suggest corporate tenants are responsible for only 13% of the demand increase. Some of the tenants responsible for this spike in demand include:

How to Make Your Furnished Rental Appealing and Profitable

If you decide to offer a furnished rental, there are some tips you can follow to justify higher rents, ensure your home appeals to high-quality tenants, and otherwise raise profitability. Keep these things in mind when you are getting a furnished rental ready:

Our asset protection professionals at Royal Legal Solutions can help you determine which tools will best defend your new and existing investments. The law favors the proactive, and in our experience it is best to take action long before you think a lawsuit is even a possibility. By the time you’re expecting a lawsuit, it may be too late. So don’t delay. Schedule your personalized asset protection consultation today.

What George Bush's Recent Death Reminds Us About Estate Planning

George H.W. Bush passed away on November 30, 2018 at the age of 94, making him the longest living President in United States History. His death came a mere eight months after the passing of his wife, Barbara Bush. While his storied life has already shaped the former President’s legacy, his death also reminds the rest of us about simple to overlook yet important aspects of estate planning.

Spouses Dying in Quick Succession Can Create Estate Planning Issues

Cases like the Bush’s, where both spouses die in a narrow window of time, can create issues. Generally, a spouse is the beneficiary of a life insurance policy or retirement plan, and often also an heir. If there is no estate plan, both estates will end up in Probate Court--where questions of how assets will pass, to whom, and in what order can take months or even years to hammer out. In blended family situations where one spouse may have children unrelated to the other’s, things can get especially sticky.

Even where there are no family complications and there is an estate plan in place, wills and trusts may have survivorship requirements. Ask your attorney about this issue when creating your estate plan. Retirement accounts may also be complicated when two spouses die within a short time period. If the surviving spouse does not roll the retirement funds into their account as soon as possible, contingent beneficiaries like children may not receive the benefits.

The Importance of Planning Your Estate Ahead of Time

Now, we do not know or claim to know the details of the former President’s estate plan, though we can speculate he likely did have one. His death can serve as a reminder of the importance of creating and maintaining an up-to-date estate plan.

Real estate investors in particular have specific issues to worry about when it comes to their legacy. Not only do we want to provide for our heirs, but we must also decide who will inherit our real estate businesses. We can’t afford to be lazy on estate planning details. For instance, did you know that you must update your estate plan every time you acquire a new asset? Major life events such as marriage or the death of a beneficiary also call for updates. Fortunately, with professional help, you can stay on top of your estate plan and be certain your legacy is carried out as planned. At Royal Legal Solutions, we offer estate planning services and monthly package options that include regular estate planning updates to help busy investors maintain current plans.

Don’t Try This At Home: Get Help Planning Your Estate From the Professionals

If you’re tempted to put off estate planning, don’t. Make your plans now to ensure your wishes are carried out and that your loved ones are provided for as you see fit. The experts at Royal Legal Solutions are sensitive to the estate planning needs of real estate investors. If you have questions about our estate planning services, contact Royal Legal Solutions or schedule your estate planning consultation today.