There are 78.6 million Americans that can be classified as millennials today. Making up a staggering 26.3 million American households, it is no wonder landlords are tapping into millennials’ desires to continue renting as opposed to becoming homeowners.
Millennials have quickly become the nation’s largest generation, even outnumbering the Baby Boomers. And, despite it being 23% cheaper to purchase a home in most housing markets, this significant demographic continues to rent, and at a high price.
Today we will look at why millennials are choosing to rent homes over buying them so you can appeal to them when they apply to lease your Anne Arundel County home.
Home Ownership Qualifications
Since the recession, qualifying for a home loan has become increasingly difficulty causing many young millennials to continue renting. In order to qualify for a home loan, a potential buyer must have a solid credit score, a large down payment upwards of 20% of the purchase price, and a steady income with sufficient savings as a reserve.
Unfortunately, America has seen a decreasing median household income that has hit millennials hard. In fact, the average income for millennials has dropped between 5% and 15% since 2000, making it even harder to save for a hefty down payment to become a homeowner. In areas with thriving real estate markets such as the one seen in Severna Park, putting down a large enough down payment to own a home is not necessarily doable. Thus, millennials continue to rent.
In addition to the stricter home loan requirements, the United States has experienced a huge population boom. Remember, millennials make up the nation’s largest generation.
Because of this, our nation has approximately 28 million millennials vying for jobs, including the additional 24.5 million people over the age of 55 that are now in the work force as compared to the year 2000.
Because of this huge labor supply, demand for jobs has increased dramatically forcing younger, less experienced millennials to further their education in order to stay competitive in the labor market. This extra education equals student loan debt, and lots of it.
As of now, Americans owe nearly 1.3 trillion dollars in student loans amongst the nearly 43 million borrowers. With the average loan amount owned being $35,000, the financial strain to make ends meet is forcing millennials to reconsider home ownership. Not only do many millennials not qualify for a home loan because of their staggering debt, they simply cannot afford a down payment on a home. Thus, millennials continue to rent.
it is estimated that one-fifth of all millennials still live at home with their parents. This means that many millennials are gearing up to move out on their own soon as they age and renting a home will most likely be the first step in their independent lives. This trend is looking to be very promising for landlords, especially those with rental properties in the Glen Burnie area.
In addition to millennials living at home for longer before striking out on their own, it has been shown that marriage and child-bearing trends are evolving as well. It would seem that the average ages to marry and have children have been put off for approximately 2 additional years, if not more. Since these two life events are often a precursor to home ownership, it would also seem a delay in purchasing a home would be expected. Thus, millennials continue to rent.
Though owning a home may show to be less expensive on paper, everyone is aware that the costs of home ownership do not end with a mortgage. In addition to the down payment and closing costs, there are several other costs to consider before making the leap from renting a home to owning one:
- Additional homeowners insurance (otherwise known as Private Mortgage Insurance, or PMI)
- Property taxes
- Maintenance and repairs
- All utilities
- Homeowners Association Fees
For millennials already straddled with lots of student debt (among everyday debt that Americans tend to carry) these extra costs are not manageable despite an expected lower monthly mortgage payment when compared to renting.
In addition, landlords are catering to these young millennials more and more making their rental properties much more appealing than home ownership that comes with so much added cost. For instance, many communities with available rental properties offer:
- Fitness centers
- On-site maintenance
- Large common areas
- Dog parks
- Attached yards
- Covered parking or garages
- Great locations within the city near shopping centers, restaurants, and entertainment, such as rental properties in Laurel.
Millennials are drawn to the fact that though they might spend a bit more renting a property, the tradeoff is worth it for the included amenities leasing a home provides. Plus, not having to care for things such as maintenance and repairs, some utilities, and extras like gym memberships actually makes renting a home for longer the better choice financially. Thus, millennials continue to rent.
Just in case you wonder whether the stereotypes of millennials hold true, such as the ones stating they are entitled, unable to hold jobs, fiscally irresponsible, or just plain lazy, remember that these are just stereotypes and do not always hold true.
When the Urban Land Institute conducted its research on what millennials wanted and why, they found that 84% of millennials had never once fallen behind on their rent payments, despite the rising costs. For 11% of them, it had only happened once or twice. And in the end, it was only 4% of sampled millennials that had actually been evicted for nonpayments of their rent or other lease violations.
Now, while placing a millennial in your Fort Meade rental home may seem risky based on this report’s results, keep in mind that approximately 25% of all Americans, regardless of whether they are a millennial or not, do not pay their bills on time, rent included. That’s 56 million Americans that can’t make the bills each month. Therefore, renting to a millennial is no less risky than renting to a non-millennial in this respect.
Despite the poor reputation that precedes many millennials in America today, the trust is leasing your Anne Arundel County home to anyone is risky. That is why thorough tenant screening, solid lease agreements, routine inspections, and more should be a consistent practice when you are leasing your property. Luckily for you, Bay Management Group does all of this and more when managing your Maryland rental properties, and they do it well.
If you are looking to rent your Maryland home, consider using Bay Management Group for all of your property management needs. And consider renting to the millennials that apply to lease your home. There are plenty of them to choose from and for the most part they have a good sense of what they want in life, and as far as how they want to live, renting is their top choice. Sounds good to Maryland landlords if you ask me.