The Next Generation of Renters

As millennials continue to bore into the real estate market, renting has become the mainstay of the younger generation.  Inability to save and lack of a strong credit history are key contributors to homeownership rates dropping.  If this trend continues the next Generation, Z, will be absolutely forced into renting.

RentCafe recently released an incredibly detailed study indicating that Generation Z will pay over $102,000 in rent by the time they hit age 30.  This is based on millennials spending approximately 45% of their income on rent, which averages out to $92,600 by the time they hit 30.  Compare this to Baby Boomers who paid approximately $66,900 in rent before turning 30.

Florentina Sarac states “Given their overwhelming student loan debt, younger Millennials may carry on renting, simply because the prospect of buying is not yet attainable.  On the other hand, older Millennials are starting to slowly shift towards home ownership.”

Rent burdens have been the hardest on younger Millennials, aged 22-29, with 47%.  Older Millennials clock in at 44%.  With a substantial amount of income dedicated to renting, Millennials will not be afforded the luxury of owning a home easily.

Furthermore, Millennials earn and pay more in rent than both Generation X, and Baby Boomers.  The income difference ranges from $4,500 to $10,900 while the rent difference ranges from $10,400 to $21,600.

“It’s worth noting that the rent difference between Millennials and Baby Boomers is twice as big as the income difference.”

Without a drastic shift in the real estate market, it will become more and more difficult for Millennials and subsequent generations to make the leap from renting to home ownership.

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Renting in Modern Atlanta

atlanta-juneteenth_article_story_mainJust like in the rest of the country, residential real estate in Atlanta is changing quickly as many people, especially those often-cited Millennials, move into more urban and metro areas seeking not just jobs but also all the excitement that living in a more densely populated area often brings. As a city with one of the highest rates of renters vs homeowners, Atlanta offers some interesting perspectives and insights into what renting in today’s market looks like and into why people choose to rent vs buy to begin with.

It  is interesting to note that over the past several years, the number of renters has greatly increased in the suburbs compared to Atlanta’s more urban areas. According to Rent Café, the number of suburban renters increased by about 25% from 2011 to 2015, more than 50,000 people, compared only about 15,000, or 10%, in urban areas. Atlanta is definitely an urban city of suburban sprawl, and with 61% of total renters in the suburbs and those areas capturing a lot of the rent growth it seems like it may stay that way for some time. Those suburban renters cite better schools, quieter communities, and lower rents ($1,277 urban vs $1,006 suburban averages) as reasons they choose to leave the city’s inner neighborhoods.

Some good news for all these Atlanta renters? Zillow says it anticipates that rent growth will, after years of hearty spikes, start to level off  around .9% nationwide in the coming year. Maybe that is why only 41% of current renters say they expect to move or have any interest in owning a home– the lowest number ever recorded according to a recent Freddie Mac survey. Times they are a’ changin’, but it looks like renting is here to stay, and that’s certainly true in Atlanta. 

Millennials and Home Buying: A Look at Credit Scores

A young 3D woman debt consumer works to build up her credit scorAs the millennial generation continues to head-butt its way into the housing market, credit scores are creating a sizable burden on their ability to purchase a home.  A recent Rent.com survey stated that 78% of the millennial generation renters do not plan on buying a home soon.

Many cite the benefits of renting as their mainstay against home buying.  However, in a recent TransUnion survey, 43% of those aged 18-34 blame subpar credit scores.

So why aren’t millennials buying houses?

Inability to obtain a fair mortgage and a general disinterest in buying.  Credit score is the biggest hurdle for the younger generation, as most mortgages have a minimum requirement of credit score.

TransUnion found that one third of adults aged 18 to 34 have a credit score in between 300 and 600. A credit score of 620 will score you a mortgage, but anything lower is a crapshoot.

On average, millennials have a shorter credit history, which means there is more gravity in a missed payment as opposed to an older home buyer.  Millennials do not have the cushion of a long credit history, so their mistakes are more prominent, resulting in lower scores.

Another thicket to cut through is the initial cost; the down payment.  TransUnion found that nearly 60% of consumers aged 18-34 worry about obtaining a down payment.  Coupled with lower credit scores, the task becomes daunting, forcing millennials to stay renting.

It will be interesting to see how the housing market adjusts to masses of millennials renting, and putting off their first home purchase.

Will home prices come down to make up for missed capital or will rents skyrocket and force millennials to reconsider?

Suburban Rent Prices on the Rise

Screen Shot 2017-10-23 at 2.18.55 PMWhen you think of more affordable housing, you think of the suburbs; more space, more land, better prices from homes to rentals.  However, as millennials begin to wiggle their way into the real estate market, pricing in the suburbs seems to be suffering.  

In the last year the cost of renting a home in the suburbs has risen higher than the cost of renting in the city.  In a new release by Zillow, median monthly cost of suburban rents rose by 2.5% while urban rents only rose by 2.3%.  

This is a stark difference from last year where urban rental prices were up 5% while suburban rental prices were closer to 3%.  The cities that are experiencing the fastest increases are Portland, Seattle, and San Francisco.  San Francisco experienced an urban rental price drop of 0.4% and a 2.6% increase in suburban rental price.      

The more prominent examples of this trend reside in cities where rent affordability is a main issue.  Renters who are paying more than 44% of their income in rent, like San Francisco, are the driving force here.  

Screen Shot 2017-10-23 at 2.18.55 PMAs rent continues to rise in cities, renters will either have to make due or forfeit their apartments for cheaper options elsewhere.  Choosing a longer commute for a drop in rent prices seems to be the main solution.  

While these statistics only define renting, home ownership plays a huge part in it.  Most millennials would like to buy a home but lack the assets, especially the down payment, to realistically make the jump.  With rent prices on the rise, and the inability to buy homes, there is no reason to not expect this trend to continue into 2018.     

Will we see a mass exodus of city renters transitioning to suburbs?  What effect will this have on the pricing of rentals and homes?  Only time will tell.    

New Brightline Rail connects South Florida

2Brightline Rail Service, connecting Miami, Fort Lauderdale and West Palm Beach, will soon launch and offer discounted rates for its first few trips. The tentative first runs will begin in late summer with full service opening up in early autumn. Ride ticket prices have not been announced, but CEO Dave Howard stated that it is, “going to be less than the cost of driving your car” regarding the discounted tickets.

The bigger picture to this private endeavor is that it will connect our metro and stay east of I-95. At full service the rail will offer 32 daily round trips between Miami and West Palm Beach. This is a crucial step into changing South Florida’s car-centric culture. Traffic continues to be one of the leading limiting factors for economic growth in our market. Brightline expects a ridership of three million passengers per year.

Each county is getting its own station starting with a more than eleven acre Miami Central Station that will offer residences, offices and retail. Broward and Palm Beach Counties will get 60,000 square foot stations right in the heart of their urban core.

Landlords in the area should get excited because this brings the city connections that renters look for in a short or long-term home. The Millennial generation tends to especially enjoy alternative travel and staying close to major elements in the city.

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Renter’s Regret and Buyer’s Remorse

The old adage about grass being greener can be used in almost any situation, but because shelter is a basic human need, pretty much all of us can find something about our living situation, be it renting or owning, that we’d rather not have to deal with and could imagine being better if only we had chosen the other option.

A recent survey conducted by Trulia has found that nearly half the respondents had at least something to complain about after their decision. A whopping 71% of Millennials polled were disappointed.

  • 44% of homeowners took issue with their purchase or the process they went through to get it.giphy
  • 41% of renters said they wish they had bought instead, despite the fact that 1 in 4 respondents with a household income above $100,000 said they didn’t even think they could afford to buy. A forlorn renter might ask, “What could possibly be wrong with owning?!” Well, the survey has a response:  size does matter, apparently.
  • 33% of homeowners wish they had gone bigger. (Sorry, tiny home lovers) Interestingly, 9% – a fair shake – wish they had gone smaller. (Are McMansions finally losing appeal?) For owners, another oft cited regret was the amount of remodeling they had done or not done:
  • 26% said they wish they had made a different decision in that department.

So what about those remorseful renters who wish they’d bought?

tumblr_inline_nfnz6wGIwe1ru34zh.gifExperts say they should make sure to do as much research as possible. A lot goes into buying a home, and you don’t want to make such a large purchase just to end up like those regretful owners living forever unsatisfied with their choice.

Buy when you have your sights set on long-term goals and have done all you can to pay down other debts and save up a considerable down payment. Do a lot of research and preparation, and give yourself firm boundaries before you start looking for your dream home. Shopping, falling in love, then figuring out how to buy that property is “not a recipe for success”.

Remember that while renting can be a pain, owning will come with taxes, insurance, maintenance, and more – all on top of that mortgage payment. And, experts say, be prepared to stay because you typically cannot break even until at least five years after your purchase.

 

 

 

 

Philadelphia, Young Professionals are staying here.

Genos-east-passyunk-philadelphia-video-465.jpgA recent study from the Chamber of Commerce for Greater Philadelphia reported an unexpected 93% of young professionals currently living in Philadelphia said there is a good chance their next job would be in the area as well. Furthering the optimism, the same study also reported that 42% of the people who responded were homeowners and 29% plan to buy a home in the next three to five years.
So why are professionals currently choosing Philadelphia as a place to call home?
A recent report could point to the answer. As PhillyMag states:
“Philadelphia is growing jobs at a faster pace than New York for the first time in at least 25 years, according to data complied by the regional chapter of the global commercial real estate firm CBRE.” 
For a city that has long been an afterthought for millennial and young professionals settling down, this study brings extremely welcome news. The area is home to some of the nations top Universities such as Penn and Villanova, so it is no surprise the “Eds and Meds” sector is leading employment opportunities. Fast paced growth was also seen in the transportation and warehousing sectors.
As highly educated young professionals continue to stay the area, it seems as though the “Eds and Meds” model should continue to create employment growth in the area for years to come.

Adam Ozimek, a senior economist at Moody’s Analytics in West Chester, was recently interviewed by Philly.com and is excited by the growth in the Philadelphia area:

“There’s clearly optimism. It’s a very exciting time to be watching the Philadelphia economy, that’s for sure. It feels like there’s a possibility that Philadelphia could be like one of those mega-cities.”