COVID-19 continues to impact the U.S., affecting not only our health, but also our financial and life decisions. For those who wanted to take the leap from renting to buying this year, their hopeful plans are quickly changing. At the start of 2020, 11% of renters said they were ready and planning to buy a home this year, according to a recent homebuying survey conducted on RentCafe.com. Conditions were looking up for Gen X renters, 15% of whom were making plans to buy a home this year, as well as for 14% of Older Millennials.
However, the pandemic has obstructed the path to homeownership for 43% of renters ready to buy, our survey results revealed. On top of high home prices, this is yet another deterrent forcing many renters to further delay or give up on the most important archetype of the American Dream. The homebuying survey, which ran at the end of May 2020, asked 7,000 renters about their housing plans before and after the coronavirus hit.
Of those who decided to continue renting, the largest share had plans to downgrade to a smaller apartment, driven by Gen Z-ers and Baby Boomers. However, Millennials and Gen Xers had bolder plans, a high percentage of whom expressed a wish to upgrade to a larger apartment in 2020.
Homebuying survey shows that economic uncertainty causes 43% of prospective home buyers to change plans
Meanwhile, 43% of prospective home buyers who said they changed their plans quoted economic uncertainty as the top reason for doing so, followed by loss of income as the second most cited reason. Given the unprecedented times we’re living in, even the few renters who were determined to make the commitment to buy a home this year are now getting cold feet. Moreover, as many as 50% of Older Millennials, the most likely demographic to become homeowners, were forced by the pandemic to let go of their dream.
The least concerned were Baby Boomers, of whom only 37% reconsidered buying a home. As a generation that has already weathered financial uncertainty with previous economic crises, a considerable percentage of them are decided to find their footing amid financial uncertainty and not let current events stop them from owning a home.
Nearly one-quarter of renters now believe they will never buy a home
As part of the homebuying survey, we also asked renters about when they planned to buy a home. While most respondents, 56%, were optimistic about buying in the next 5 years, as many as 23% said that they’re never buying. Considering the current market conditions, renting appears to remain the lifestyle of choice for many. Half of Baby Boomer renters expressed no intention of ever buying again. The less costly, more convenient renting lifestyle may play a role. With renter households over 60 increasing considerably in the past decade, Boomers seem to be getting more and more comfortable with renting.
On the flip side, Millennials are most eager to buy a home in the near future, particularly the older cohort, with as many as 68%, or two-thirds of Older Millennials planning to become homeowners in the next 5 years. Long-considered renters-at-heart, Millennials have reached a point when they are set on making the transition.
Considering the homebuying survey results, it’s safe to say that the pandemic has had a real effect on the housing plans of most people. The general tendency is to avoid taking many risks during this period of uncertainty and to choose a more economically safer approach. This is clear across all generations, despite some of them showing more stoicism than others.
To get an expert’s opinion on important issues related to renters’ housing choices, we spoke with Doug Ressler, manager of business intelligence at Yardi Matrix:
Q: What one piece of advice would you give to Gen Zers and Younger Millennials who want to become homeowners sooner?
A: The buy vs. rent analysis is partially financial and partially emotional. The financial part of the analysis is difficult to work out because of future assumptions. However, one also needs to understand the level of risk and flexibility that come with each option as well as individual desires before making a purchase versus rental decision.
Q: There’s a large share of renters who think they’ll never become homeowners. Why is that?
A: When it comes to the complexities of real estate investment, personal finances, and future economic time horizons, the conventional wisdom of buying being better than renting does not always hold true.
Many renters don’t think that they’ll ever own a home because they might not afford additional expenses that come with this decision, such as interest, property taxes, insurance, and maintenance for the entire ownership period. On the other hand, renting consists only of monthly rent and a possible one-time deposit, therefore economically, renting might make more sense than buying a home.
Q: In your opinion, what is the number one reason Millennials, Gen Xers, and Boomers do not purchase a home and rent instead?
A: As more Millennials are moving up the earnings ladder, get married, and start families, housing is increasingly taking center stage. Although they have a higher number of graduates than Gen Xers and Baby Boomers, they are less likely to own a home. Some of the barriers to homeownership could be delayed marriage, student debt, and choosing to live in high-cost cities.
Q: Is it a good idea to buy a home now? In which cities?
A: This would depend on financial considerations and the targeted area of purchase. In more than half (59%) of housing markets nationwide — 442 of 755 U.S. counties — renting a three-bedroom property is now more affordable than buying a median-priced home.
The lowest median home prices would be in the Houston metro area, Orlando metro area, or Chicago metro area, all three boasting a high percentage of Millennials.
Doug Ressler is the director of business intelligence at Yardi Matrix, where he is responsible for the creation of business and statistical research models for the commercial real estate industry. Previously, he was an analyst at the multifamily market research company Pierce-Eislen. He holds a master’s degree in business administration from Arizona State University and a bachelor’s degree in business administration from Pennsylvania State University.
RentCafe is a nationwide apartment search website that enables renters to easily find apartments and houses for rent throughout the United States.
The homebuying survey data was collected through an online questionnaire posted on our website between May 20 and May 27, among a total number of 6,963 U.S. respondents.
The respondents were asked individual questions about their housing choices and some demographic data such as age.
We used the following age ranges for each generation: Gen Zers: 18-25, Younger Millennials: 26-30, Older Millennials: 31-40, Gen Xers: 41-55, Baby Boomers: 56-75.
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