Let’s face it, blaming the Millennials for life’s laments has become a national pastime for some. 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 affecting (and caused by) this population.
Like it or not, Millennials’ habits will dictate certain real estate trends over the coming years–and as real estate investors, we should be mindful of broader trends in the market and population.
Millennials Set Record For Lowest Home Ownership in Their Age Bracket
They aren’t buying homes at the rate of 18-35 year olds past, but there are reasons beyond any person’s control for that. But here’s the thing: you can’t just blame Millennials themselves.
The real estate deck is stacked, so to speak, against first time home-owners 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 reason why comes 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 2019, 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 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 in the near future. Seriously. Any college student, even. Those aren’t laughing uncontrollably may conservatively guess a decade.
Millennials face a different world: student loans and debt by age 22 are certain for those beginning 4-year college. This generation’s unique challenges include:
- skyrocketing education costs
- a workforce that doesn’t value their labor the way generations past could count on
- lack of benefits or secure employment (gig economies and independent contracting are still on the rise)
- Astronomical and rising rental rates.
Renting Is often difficult that Millennials are 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. Knowing this group’s challenges helps you relate (or understand the real estate issues if you’re a Millennial) in life and business. Frankly, all REIs benefit from understanding the struggles their Millennial tenants, partners, and fellow investors face.