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More Millennials Buying Homes

Renting Tendencies Still Dominate

By Dave Sorter | Tuesday, August 15, 2017

 

There’s one reason the national homeownership rate increased to 63.7% in the second quarter: Millennials.

 
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Believe it or not, millennials – that age cohort that has taken the traditional young-adult preference for renting to new levels – was the only group to increase its homeownership rate in the last quarter, from 34.3% in the first quarter to 35.3% in the second quarter, according to the U.S. Census Bureau.

That’s still by far the lowest generational rate around -- 58.8% of 35- to 44-year-olds own their homes -- but like their elders, millennials are picking up their home-buying pace as they age. In fact, breaking down the age cohort further, the Census found that the homeownership rate was 45.2% for ages 30-34, 32.1% for ages 25-29 (some 2.2 percentage points higher than the 2Q16 rate), and 23.3% for ages 24 and younger.

But if more millennials start buying homes, what does that mean for the apartment market, which the 18-35 age group has dominated this cycle more than any other?

Probably not a whole lot.

Defining the millennial generation as those born from 1980-2000, the oldest millennials are at the age when people historically have been purchasing homes. But apartment rental is still the dominant form of residence. A 35.3% homeownership rate means that 64.7% of millennials are renting. So, apartment rental trends among millennials are still quite strong.

The increase in job gains over the past couple of years – 2.158 million jobs added in the 12 months ending in July, according to the Bureau of Labor statistics – keeps apartment demand high among millennials. New jobs allow young adults living with parents to move out on their own, though the percentage of the millennial generation living at home was a cycle high 15% in 2016, according to the Census. And the rate of apartment household formation continues to exceed that of single-family household formation, multifamily research found.

Apartment demand will continue strong in the future, with Generation Z – a.k.a. “centennials” – starting to enter renting age. And, as with young adults of every generation, apartment rental trends are high.

Meanwhile, the 63.7% overall homeownership rate was 80 basis points (bps) higher than the 6.29% of the second quarter of 2016, the rate’s low point, according to the Census. Homeownership increased year-over-year in all four regions of the nation:

  • 100 bps to 58.9% in the West.
  • 80 bps to 60.4% in the Northeast.
  • 70 bps to 65.5% in the South.
  • 30 bps to 68.0% in the Midwest.

However, the second-quarter rates for the Northeast were down from the first-quarter rates in the Northeast (-20 bps) and the West (-10 bps), and up in the Midwest (+40 bps) and South (+10 bps).

As mentioned, millennials were the only age group with an increased homeownership rate from the first quarter. The Generation X cohorts of ages 35-44 (58.8% ownership) and 45-54 (69.3%) were down by 20 bps and 10 bps, respectively. Younger baby-boomers (ages 55-64) were down 20 bps to 75.4%, while the ages 65 and older cohort rate declined 40 bps to 78.2%.

 
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Year-over-year, on the other hand, all cohorts’ rates increased year over year: millennials by 110 bps, ages 35-44 by 50 bps; ages 45-54 by 20 bps; ages 55-64 by 70 bps; and ages 65+ by 30 bps.

So while millennial homeownership rates may be slowly edging higher, apartment rental trends are still heading upward.

 

 

Dave Sorter

Dave Sorter

Journalist

Dave Sorter is an award-winning journalist who spent 30 years as a newspaper reporter and editor before joining Axiometrics. He oversees all Axio blogs and newsletters and serves as senior editor of all Axio publications.

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