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The Next Billion Dollar Company Will Reinvent Home Ownership for Millennials featured by SVN | SFRhub Advisors

In the past, the American dream was to own a home, nowadays, the mentality has shifted to something different. There are a lot of studies that show homeownership for the average millennial is not feasible nor aligned with their lifestyle. Homeownership among millennials below the age of 35 is at its lowest level in over 30 years.

The dream of home ownership is becoming more difficult to achieve. Many Americans do not have enough cash for a down-payment or the credit history to qualify for a mortgage. So, what do millennials do? They rent, they rent single-family residential homes.

Keep reading below to learn more.

Originally posted by Medha Agarwal on LinkedIn.

Homeownership, as it stands today, is not feasible for the average millennial nor is it aligned with their lifestyle. I believe there will be large companies built on new ownership models that adjust to this new reality and fill the large void in today’s market.

In this post, I share statistics about market trends as well as consumers’ financial and demographic characteristics to illustrate the current state of affairs. I also explain why it is the time for new, disruptive companies to thrive.

What is the current state?

Homeownership among millennials below the age of 35 is at its lowest level in over 30 years.

Homeownership Rates for Ages 35 and higher.png

Why is homeownership declining?

(1) The average American has less cash and (2) their lifestyle is increasingly incompatible with traditional ownership structures.

(1) The dream of home ownership is becoming more difficult to achieve. Many Americans do not have enough cash for a down-payment or the credit history to qualify for a mortgage.

Debt has increased…

Some have posited that these individuals are simply waiting longer to buy a home. This theory, unfortunately, does not play out in the data. Among ages 35–44 homeownership rates have declined even further.

Why is homeownership declining?

(1) The average American has less cash and (2) their lifestyle is increasingly incompatible with traditional ownership structures.

(1) The dream of home ownership is becoming more difficult to achieve. Many Americans do not have enough cash for a down-payment or the credit history to qualify for a mortgage.

Debt has increased…

…and savings have decreased.

(2) At the same time how we live is changing. Unlike their grandparents, millennials are no longer getting married in their early 20s, buying a 4 bedroom house in the suburb, and moving up the corporate ladder at one company for their entire career.

Instead they are increasingly urban, delaying marriage, and more mobile both professionally and geographically.

The percentage of the US population that lives in urban areas has been increasing steadily. In 2018, 84% of Americans live in urban areas, compared to 65% in 1955. Homes in urban areas are more costly per square foot than rural ones, so the price of ownership has increased as this migration has continued.

At the same time, millennials are settling down later than ever before. In 2017 the average man first married at almost 30, 7 years later than the average man in 1950. Similarly, the average woman now marries at 27, compared to 20.

Millennials today are also more likely to switch jobs than previous generations. According to LinkedIn, over the last 20 years the number of companies people worked for in the 5 years after they graduated has nearly doubled.

Someone who graduated between 2006 and 2010 averaged nearly 2.85 jobs compared to the 1.6 jobs of someone who graduated between 1986 and 1990. As the chart above also shows, the number of companies people work for 5 to 10 years after graduating has increased as well.

No wonder then that homeownership has declined. According to Redfin, it takes 5–7 years to break even on one time home ownership costs considering the costs of purchasing, owning, and selling the home. In fact, SmartAsset has an interesting rent vs. buy calculator that shows how many years it would take to break even in major cities given the alternative of renting. This data makes it clear that not only is ownership not financially possible but also just does not make sense for many millennials given their mobile lifestyle. They are doing the math and deciding to postpone buying.


 

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Contact Jeff Cline at SVN | SFRhub Advisors
SVN | SFRhub Advisors
Phone: 602-441-5354
2400 E. Arizona Biltmore Circle
Suite 1400
Phoenix, AZ 85016

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