The economy has forced more people into the renter’s market and aged first-time homebuyers.
The growth rate for renter households rose by 2.7 percent in the third quarter of 2024, meaning a record 45.6 million U.S. households are renting rather than owning. While homeownership has grown as well (0.9%) to reach a record 86.9 million, renter households have risen three times faster than homeowner households.
What is going on?
The housing market is in a sort of Catch-22 for the U.S. In September, median rents were up 0.6% year over year, and mortgage rates were down 1.31%. The more renters in the system, the higher rents go. In many cities, mortgages are lower than rents.
Still, home prices have not come down, and mortgage rates have not declined enough to make homeownership affordable, leaving renting as the only option.
Homebuyers Are Much Older Now
Another contributing factor to the increase in renter households is that younger generations are not viewing homeownership as a life goal as previous generations have. As a result, US homebuyers are the oldest they’ve been in recorded history.
According to the National Association of Realtors (NAR), the median age of first-time homebuyers is now 38, up 3 years from 2023. The average age for repeat homebuyers is also much higher at 61. To put this in perspective, the average first-time homebuyer age in 1981, when NAR first started tracking homebuyer data, was 29. The average repeat homebuyer age was 36.
Today, fewer than one in four homes are bought by first-timers, even though rent prices are far outpacing wages and mortgages in many major cities.
Gen Z Has Its Own Ideas About Home Ownership
Some experts point out that Gen Z and younger Millennials are renting because it gives them more flexibility and allows them to live in preferred neighborhoods where they can’t afford to buy. On average, three-quarters of renters consider moving again within three years to a better apartment or to purchase a condo, particularly while they are still single.
Gen Z is delaying marriage and having children, so in their minds, purchasing a home is not urgent. Renting allows them to invest money and earn wealth until they can afford to purchase a home where they want to live longer term once they start a family, where school districts, taxes, and commutes are more desirable.
Eighty percent of Generation Zers and 82 percent of Millennials agree that owning a home is a good long-term investment and worth incurring debt. Yet, Gen Zers are also far more likely to see renting as a wiser financial choice than buying a home.
If Gen Zers see owning a home as a future goal, they need to start planning now by educating themselves on what it takes to buy a home, keeping their credit scores up, keeping their debt-to-income ratio low, and saving some money for a down payment.
Despite encouraging economic signs and political promises, most real estate experts agree that the market is likely stuck for the foreseeable future. Therefore, prospective homebuyers have time to get their ducks in a row for when the market cools and more homes become available. In the interim, the average age of homeownership will likely continue to rise.
Sources: USA Today, Insurance Journal, The Hill, InMyArea.com, Forbes, National Association of Realtors
コメント