Views on home-ownership
Zillow polled different age groups about owning a home and found similar positive feelings.
Q: Owning a home is necessary to be a respected member of society:
18-34: 45 percent
35-49: 40 percent
50-64: 31 percent
65+: 30 percent
Q: Owning a home is necessary to live “the good life” or “The American Dream”:
18-34: 64 percent
35-49: 57 percent
50-64: 55 percent
65+: 64 percent
Q: Owning a home is the best long-term investment:
18-34: 66 percent
35-49: 61 percent
50-64: 61 percent
65+: 68 percent
Q: Owning a home provides more personal freedom than renting:
18-34: 70 percent
35-49: 62 percent
50-64: 59 percent
65+: 65 percent
Source: Zillow
A shortage of first-time buyers and a booming apartment market suggest that millennials have such a dim view of home ownership that they’d rather rent indefinitely.
The narrative goes that they’d rather stay mobile, unburdened by either a mortgage or the responsibility of owning vs. renting. Such a scenario strikes fear in the hearts of some real estate pros and has major ramifications for development patterns in metro Atlanta.
It may not be completely true, however.
Recent trends, including early signs of a rebound in young home buyers, indicate young adults want as much as anyone to own a home, but that financial barriers are blocking the dream.
Rising housing costs, stagnant wages, student debt and other factors hold them back, stymieing one of the cornerstones of the consumer economy, experts told journalists and industry insiders last month at the National Association of Real Estate Editors Conference in Miami.
A study by real estate information firm Zillow and data from other groups suggest millennials aren’t all that different from Gen-Xers or Baby Boomers when it comes to thoughts on home ownership.
Nearly two-thirds of adults 18 to 34 said owning a home is a prerequisite “for living the good life or the American dream,” the same rate as seniors 65 and older. Young adults also polled at nearly the same rate – 66 percent to 68 percent – as saying that a home was the best investment.
And 70 percent of millennials polled – five points higher than seniors – said owning provides more personal freedom than renting, according to Zillow.
Further, though millennials have been slow to get married and have kids, the generation is starting to form new households at a typical rate.
Renting by choice – along with young adults’ and even Baby Boomers’ new fondness for walkability, transit and experiential living — has been among the justifications for skyline-altering fleets of apartment development and urban infill in metro Atlanta and across the country.
Record rents and tight vacancies validate the surge, for now at least. About 41,000 apartment units are in some stage of the development pipeline in the metro area, half of them in the city of Atlanta, according to research firm Databank Atlanta.
Strange market
The non-rental market could use more couples like Elizabeth Peyton, 32, of Brookhaven, and her husband Michael.
Peyton and her husband bought a starter three-bedroom, one-bath bungalow, in 2008, near the bottom of the market. They recently traded-up for a home with larger bedrooms and an extra full bathroom.
Peyton said she always viewed home-ownership as “part of the progression.”
"We felt it was kind of a first step of starting a family," said Peyton, who also has a son.
But the Peytons’ story of a first purchase followed by a move-up a few years later is not as typical as it once was. As a result both metro Atlanta and the nation have been locked in a strange home market since the recession.
Interest rates remain historically low and the economy has been growing for about six years, though job growth has moved in frustrating fits and starts.
Many young adults’ ability to buy has been kneecapped by debt, a lack of savings and trouble finding career traction. Student loan debt for people under 30 doubled between 2004 and 2014, to $369 billion, and Atlanta-based Equifax just released a report showing that twenty-somethings aren’t taking on mortgage debt like past generations.
Lending standards also remain tight following the housing collapse. Meanwhile, many established adults who might be prime candidates to trade up are staying put for a mix of reasons. That limits supply of homes on the market, pushing up prices.
All that has sent many millennials into the arms of rental landlords — if not their parents’ bonus rooms.
Another factor: heightened expectations.
Like their parents
John Patrick, a real estate agent with Harry Norman Realtors in Dunwoody, said many millennial clients want a home much like their parents’, not a starter in a far-flung suburb with, God forbid, carpet and Formica instead of hardwood and granite.
That’s contributed to many young adults renting in areas where they can’t afford to buy, helping to boost demand for luxury rentals.
“They want to be in hot areas. They don’t want to go through progression,” he said.
The strong rental demand has resulted in rent spikes further limiting the ability of younger would-be buyers to afford a down payment.
Stan Humphries, chief economist at research firm Zillow, told the Miami real estate confab that a greater percentage of household income is now devoted to housing costs, particularly for renters.
“Rents have never been less affordable,” he said. “It’s a broad-based problem hitting many metros.”
Rent hikes nationally are outpacing home price gains.
In the historically high-priced San Francisco market, for instance, renters are paying 15 percent more this year than last, Humphries said.
Average rents in metro Atlanta for a two-bedroom apartment topped $1,000 per month in May, according to research firm Axiometrics, up 7 percent from a year earlier.
Home prices in metro Atlanta, meanwhile, were 5.4 percent above a year ago, according to the widely watched S&P/Case-Shiller Home Price Index, though more in some hot areas and less in others.
Roommates wanted
In response, more renters have roommates and are putting off personal expenses — even for things like medical care, Humphries said. Accumulating a down payment is a major obstacle for many.
Despite all that, recent signs of improvement in the housing market have emerged.
The rate of first-time buyers climbed to 32 percent in May from 27 percent a year ago, though it’s still below a more typical rate of about 40 percent.
The increase contributed to a “very good sentiment that buyers are coming back into the market,” Lawrence Yun, chief economist for the National Association of Realtors, said at the Miami conference.
Top real estate economists also predicted 2015 will be the best year for housing since the recession ended in 2009. Pending home sales nationally rose 5.1 percent in May over the prior month.
A survey of users at Realtor.com suggests increased interest by millennials. The site said the share of traffic from older millennial would-be buyers was 23 percent in June, up two points from January. More millennial visitors said they hoped to buy a home within three months – 65 percent in June vs. 54 percent six months ago.
That could brighten prospects for housing markets in cities like metro Atlanta, where entry-level sales tumbled after the housing bust and have been slow to recover.
Consumers are at their most confident since the boom – holding at an eight-year high, noted Frank Nothaft, chief economist at research firm CoreLogic. Consumer confidence, he said, “is a proxy for economic well-being.”
More confident consumers are “more likely to buy a big-ticket item,” he said, “like a house.”
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