As millions of millennials form households, they’re likely to rent rather than buy in numbers that could remake the American dream and reshape the housing market.
That’s the conclusion of real estate experts who spoke Wednesday at the National Association of Real Estate Editors conference in Miami.
“The rent-vs-buy question used to be a big deal,” said Noah Shlaes, chairman of the Counselors of Real Estate in Chicago. “Now people are perfectly happy renting.”
In the last half-century, the U.S. homeownership rate never has dipped below 62.9 percent. But many real estate experts predict the nation’s share of homeowners will fall as low as 60 percent — and stay there.
The U.S. homeownership peaked at 69.2 percent in 2004, according to the U.S. Census Bureau. In the first quarter of this year, the rate fell to 63.7 percent, a 22-year low.
After the Great Recession, stagnant wages, an unstable job market and strict mortgage standards have kept many Americans from buying homes.
“There’s a whole host of macro factors driving us away from homeownership,” said Dan Ganguly, chief executive of HomeUnion, a real estate investment firm in California.
Ganguly says the disappearance of middle-class jobs means many Americans who once bought houses can’t afford them.
“We are very much a country heading toward haves and have-nots,” he said. “There’s a group of people who are no longer comfortable plunking their savings in a home.”
Meanhwhile, apartment developers are wooing tenants with amenities, and a new generation of landlords is renting out single-family homes. As millennials — who are ages 20 to 35 — start families, they still want suburban lifestyles, said David Hicks, president of HomeVestors, the company known for its We Buy Ugly Houses slogan.
“As they get older, as they have kids, they want a back yard – whether they buy or rent,” Hicks said. “That’s part of the American dream, and I don’t think that’s going to change.”
HomeUnion’s Ganguly sees homeownership rates falling to 61 percent. Ken Johnson, a real estate economist at Florida Atlantic University who did not attend Wednesday’s event, predicted the level will settle at 60 percent.
“The old days of higher ownership percentages are gone,” said Ken Johnson, a real estate ecnomist at Florida Atlantic University. “My guess is that a 60 percent homeownership rate is the new normal.”