(Above) Vintage walk-up apartments in Old Town.
15-Apr-18 The American Dream of homeownership is fading among Millennials and older generations.
Apparently, an increasing number of people in the Baby Boomer and Generation X age groups prefer renting and do not anticipate buying a home, according to new research by Freddie Mac.
Profile of Todays Renter, a survey by Freddie Mac Multifamily, found that growing segments of the population Baby Boomers and Generation-Xers in particular are showing less interest in owning a home.
The survey also revealed that despite growing economic confidence among renters, affordability remains dominant in driving renter behavior.
67 percent of apartment and home renters view renting as more affordable than owning a home, including 73 percent of Baby Boomers age 53-71.
Similarly, 67 percent of renters who plan to continue leasing their housing say they will do so for financial reasons up from 59 percent just two years ago.
50 percent of Baby Boomers currently renting do not anticipate buying a home in the future, up eight percent from six months ago. Of that half, 35 percent have no interest in owning, and 15 percent believe they will never be able to afford it.
31 percent of Gen-Xers, ages 38-52, expressed that sentiment, up from 28 percent from the previous Freddie Mac renters survey. Of those Gen-Xers surveyed, 19 percent lack interest and 12 percent believe they will never be able to afford the American Dream.
The 2018 renter profile is based on a survey conducted online earlier this year among 4,115 adults, age 18 and older, including 1,209 renters. The survey was conducted by Harris Poll on behalf of Freddie Mac.
||Perceptions of affordability and cost continue to play an outsized role in the choices of Americas renters, as they overwhelmingly see renting as more affordable and the right choice for them right now, said David Brickman (left), executive vice president and head of Freddie Mac Multifamily. Remarkably, half of Baby Boomers who rent do not anticipate owning a home in the future, with a growing number of Generation-Xers following suit.
Brickman says we are witnessing a historic shift in preference among older Americans, as they increasingly are choosing the size, convenience, and affordability that renting offers over ownership.
Cost drives rental decisions
Although the research found that a growing number of renters believe their economic situation has improved compared to last year, it also finds that cost is increasingly driving rental decisions. While 67 percent of renters stated they will continue renting for financial reasons, that number is significantly higher for Millennials aged 21-37, jumping 15 percent from 59 percent in 2016 to 74 percent today.
Multifamily renters versus single-family renters expressing this view jumped 11 percent from 57 percent in 2016 to 68 percent today. Although this increase takes place in all geographic areas, urban renters are increasingly likely to continue renting for financial reasons, Freddie Mac reported.
As part of the renter research, a companion survey conducted by GfK Custom Research found that cost concerns play a major role in mobility and housing choices.
This study shows a significant majority 64 percent of renters cite price as the most important factor when considering their next home, a theme consistent across all three generations. Only 36 percent cited location as the most important factor in choosing a home.
In addition, the companion survey found that across the three generations, renters are more likely to perceive homeownership as less accessible than it was three years ago. 40 percent of respondents shared that view.
A whopping 81 percent of renters anticipate it would be difficult for them to buy a home, as compared to 38 percent who believe renting a home is difficult. Plans to continue renting remain relatively constant, with a majority 55 percent of renters indicating they plan to continue doing so.
(Right) ARC at Old Colony, renovated student housing located in the Loop.
Most renters are happy renting
The Freddie Mac survey found that a significant and growing majority of renters a solid 66 percent are satisfied with the overall rental experience, up from 60 percent in August 2017.
Even among renters who have experienced a rent increase in the past two years, a growing number 64 percent stated they do not plan to move, up from 49 percent in August 2017. This includes a noteworthy 70 percent of Baby Boomers.
The findings are consistent with Freddie Macs 2016 study of the 55-plus population, which found 63 percent of Boomers prefer to age in place. In addition, most renters 54 percent continue to believe that renting is a good choice for them now, including 71 percent of Millennials.
In addition to Boomers and Gen-Xers, 31 percent of urban renters do not see homeownership in their future, up from 27 percent in August 2017.
Renter satisfaction remains high, but the continued shortage of supply and growing demand means more renters are looking at cost than ever before, Brickman said. Although its clear that the demand for rental housing will continue for the foreseeable future, this survey is also a reminder of the important role Freddie Mac plays in financing low-income and workforce housing across the United States.