Millennials Make Historic Switch From Renter-Majority to Homeowner-Majority Generation

1/11/2024

The pandemic and the evolution of the real estate market during the last few years didn’t suppress Millennials’ appetite for buying forever homes. On the contrary, most Millennials are now sipping their matchas in their own homes rather than in rentals.

With 52% of Millennials owning a home, the largest generation in the nation transitioned from renter-majority to owner-majority in 2022.
The number of Millennial homeowners increased by 7 million in the last five years, more than triple the number added by Gen X, who came in second.
Millennials remained the dominant renter generation, with 17.2 million renter households.
Gen Z is now the only renter-majority generation with a 74% share and 4.5 million renters added in the last five years, more than any other age group.
Of the nation’s top 50 largest metros, Richmond, VA, saw the highest jump in Millennial homeowners — 234%.

This demographic gained 10.8 million homeowners in the last decade, including 7.1 million in the last five years to reach 18.2 million in 2022. This boost tipped the balance in favor of homeownership and made Millennials an owner-majority generation with a share of 51.5%.

As a result, this demographic (also known as generation Y) passed the renter-majority torch to Zoomers: The Gen Z cohort gained nearly 4.5 million renters in the last five years, leading to a renter share of 74%, while all the other generations lost renters. Clearly, Gen Zers are now coming of age and becoming a significant market for apartment builders, reaching 5.6 million renter households in 2022.

Click on the arrows below to see how the number of owners and renters evolved for each generation in the last three decades.

To get a clearer view of generational trends in homeownership and renting across the country, we analyzed IPUMS data for the nation’s 110 largest metros (with populations of 500,000 or more). In more than a quarter of these metros, the number of Millennial owners doubled between 2017 and 2022.

The average Millennial homeowner bought their first home at 34 years old, later than their parents or grandparentsDue to housing affordability as well as generational values, homeownership happened later in life for Millennials than for Gen Xers or Baby Boomers. When Millennials became an owner-majority generation in 2022, the average Millennial was 34. Gen Xers reached the milestone in 2003, at an average age of 32. Boomers crossed this threshold in 1987, at the average age of 33.

The idea of the American Dream has begun to distance itself from the picket fence narrative. That’s because Millennials are living by other principles and values than their parents or grandparents. However, despite the growing popularity of the renter-by-choice lifestyle, America’s largest adult generation is now mostly made up of homeowners. Whether they bought a home to start a family or as an investment, this demographic cohort counts 18.2 million homeowners and nearly 17.2 million renters. By comparison, Baby Boomers are the largest group of homeowners at 32.1 million versus 9.1 million renters.

Family support fueled homebuying for MillennialsBetween 2017 and 2022, the number of Millennial homeowners increased by a whopping 64% to 18.2 million. The staggering addition of 7.1 million households exceeded the number added by all the other generations combined. Gen X recorded only 1.9 million new owner households in the last five years, while Baby Boomers saw a decline of 354,000 within the same timeframe.

For Gen Z, the total number of homebuyers rose by 1.6 million between 2017 and 2022, representing a 455% jump, the highest among all demographic groups we analyzed. Still, homeownership in the U.S. was dominated by Boomers, who totaled 32.1 million owners, followed by Gen X with 24.4 million owner households.

Renters vs. Owners: Five-Year Changes in Number of Households

Millennials, who are now in their prime homebuying years, had several economic factors working to their benefit in the last few years, which helped make their picket fence dreams come true. First, Gen Y reached a historically high median income in 2022: $108,000 per year, up 44% compared to five years earlier. This was the most significant income increase among all generations. Gen Z came in next with a 33% rise in median income, followed by Gen X with 25%. Boomers saw an 8% jump.

Second, many moved back in with their parents during the pandemic or delayed moving out entirely. With work-from-home supporting these decisions, many Millennials saw this period as an opportunity to save for a down payment. As a bonus, 59% of Millennial homebuyers also received financial support from their parents for their mortgage down payment, according to a LendingTree survey.

At the same time, the median home price in the U.S. has been on a steady steep climb ever since the lockdown, going from $322,600 in the spring of 2020 to $454,900 in the summer of 2022, according to the Federal Reserve Bank of St. Louis. However, this didn’t slow the housing market as anticipated.

In 2020, the number of Millennial homeowners increased by 12.6% compared to 2019. In addition, despite the record-breaking home prices during the pandemic, the number of Millennial homeowners rose by almost 30% between 2019 and 2022. Only Zoomers had a more impressive rise in homeownership in the last three years (157%), but this is to be expected as this cohort is now coming of age and establishing itself in the job market.

Five-Year Changes in Number of People Living in Multigenerational Households by Generation

When it comes to renting, only Gen Z saw an increase in the last five years — up by 391% (an addition of nearly 4.5 million renters) to a total of 5.6 million. Millennials lost close to 1.4 million renters in the same timeframe but nevertheless remained the dominant demographic in the renting market with a total of 17.1 million households in 2022. Gen X was next with 10.6 million renters, followed by Boomers with 9.1 million.

Renters vs. owners in America’s largest metros: Millennials homeowners go for New York, but renters prefer L.A.
Below, we list the changes in renting and owning by generation in the nation’s 50 largest urban areas, starting with New York, Los Angeles, Chicago, Houston and Dallas.

#1 New York
The number of Millennial homeowners in New York increased by 90% in the last five years, despite the median home sale price in the metro remaining above the $600,000 threshold since 2018. When it comes to renting, the area's rich cultural scene and dynamic tech business environment led to an 892% rise in Zoomer renters during the last five years. All of the other generations we looked at lost renters in New York, including Millennials (-0.3%).

#2 Los Angeles
In that same timeframe, Millennial homeownership jumped 47% in Los Angeles, while Millennial renters grew by 6.8%. By contrast, in more than half of the nation’s 50 largest metros, the number of Millennial renters decreased.

The West Coast metro was also attractive for the younger demographic. More precisely, the number of Zoomer renters in Los Angeles increased by 82% in the last five years. Yet, while this may seem like a significant jump, it was still considerably lower than the gains in the country's other large metros.

#3 Chicago
Chicago was preferred by young professionals looking to settle down in a major metro. One of the reasons that may have led to the trend was the 36% income increase in Chicagoland in the last five years, according to IPUMS data. Between 2017 and 2022, the metro recorded a 75.6% rise in Millennial homeowners. That said, there were also 7% fewer Millennial renters and 25% fewer Boomer renters in Chicago than there were five years prior.

#4 Houston
Down south, Houston gained homeowners in all but one generation in the last five years (Baby Boomer owners decreased by 1.6%). Specifically, the number of Millennial owners rose by 52%, while Texas’ largest metro saw a 15% decline in Millennial renters. In addition, there were 38% fewer Boomers living in rental apartments in Houston. On the other hand, the metro gained Gen Z (a 541% rise) and Gen X renters (12%).

#5 Dallas
In addition, Dallas’ tech town appeal convinced a significant amount of young talent to choose it for buying a forever home. The metro saw a 64% gain in Millennial homeowners between 2017 and 2022 and a mere 4.5% uptick in Millennial renters. The number of Gen Zers who bought a home in Dallas grew five times in that same timeframe, while the number of Zoomer renters multiplied seven times.

Surprisingly, the area was also popular for Baby Boomers. Dallas saw a 5% rise in Boomer homeowners and an 18% increase in Boomer renters in the last five years.

Millennial homeownership is rising the most in Richmond, VA

As we zoomed in on the most notable changes in the nation’s 50 largest urban hubs, Richmond, VA, stood out. Here, the number of Millennial homeowners tripled in the last five years -- the most significant rise in Millennial homeownership among the country’s largest 50 metros. The area’s funky, hipster reputation and cost of living below the state and national averages were two of the main reasons that drew in Millennials looking to buy a home.

Las Vegas occupied the second spot with a 158% jump in homeownership for the same demographic cohort, followed by Milwaukee with 157%. Cincinnati was at the other end of the spectrum with a 16% decrease in Millennial owners.

Cleveland; Raleigh, NC; San Jose, CA; and San Diego were the cities with the highest increases in the number of Millennial renters between 2017 and 2022 — 85% for the first two and close to 50% for San Diego and Silicon Valley’s largest metro area.

Florida might be the state with the most attractive cities for renters, but many cities in the Sunshine State saw decreases in their renting population in the last five years: Millennial renters in Atlanta; Tampa, FL; Cincinnati; and Jacksonville, FL, decreased by more than one-third, the most out of all the 50 largest metros.

Florida’s smaller metros are gaining Millennial homeowners at full tilt

Expanding our analysis to 110 metros, we noticed that the number of Millennial homeowners more than doubled in 29 of the areas we looked at. The top two metros by the rise in Millennial homeownership were Modesto, CA, where it increased 24 times in the last five years, and North Port, FL, where it rose eight times. Overall, the Sunshine State was the #1 choice for Millennials looking to buy a home. Namely, Port St. Lucie, Lakeland-Winter Haven and Pensacola were also at the top of the list with rises in Millennial homeownership ranging from 507% to 217%.

Our list of metros where Millennial homeownership more than doubled also included Bakersfield, CA; Youngstown, OH; Deltona, FL; Greensboro, NC; Portland, OR; Akron, OH; Omaha, NE; Atlanta; San Antonio; Grand Rapids, MI; Jacksonville, FL; Des Moines, IA; Orlando, FL; Austin, TX; Memphis, TN; and Bridgeport, CT.

Granted, experts predict that the year ahead will be a slow one for home sales, mainly because the economy is in a phase of transition. This will likely encourage renting, which should continue to be the first housing option for many, particularly for Zoomers.

Source:https://www.rentcafe.com/