A recent survey reveals that homeownership eludes the biggest generation in the US, many of whom will never be able to buy a home. Furthermore, a significant percentage claim they always plan to rent. Between them, the two scenarios paint a very rosy picture for US buy-to-let investment over the next two decades.
Apartment List recently carried out a survey among the millennial generation in the US. The group (those born between 1984 and 2000) are set to become the largest generation in the country in 2019 when their numbers will overtake baby boomers. Their size has huge implications for all sectors of the economy including US buy-to-let investment.
Homeownership aspiration goal not plan
Owning your own home is perhaps the American dream per se and seen by many as a sign that you have progressed in the world. For the millennial generation, however, this dream is further out of reach than ever before.
The Apartment List survey found that 89.4% of millennials want to buy a home. However, because of financial obstacles, “homeownership seems to be an aspiration goal rather than an imminent plan”. Just 4.9% say they will buy a property over the next year and only 15% believe they’ll purchase within one or two years from now.
A significant number are planning even more long term. Almost a third (30%) of millennials think it’s more likely to be at least five years before they can buy. And 11% expect to rent always, a promising scenario for those thinking about US buy-to-let investment.
Financial obstacles to homeownership
The reasons behind millennials’ difficulties in accessing homeownership are two-fold. The largest obstacle is lack of savings for a down payment. Stagnant wages during the financial crisis and high student debt mean that many have been unable to save enough for a deposit on a home. A significant proportion remain unable to save. This obstacle puts property purchase even further out of reach.
Furthermore, rising house prices mean that the amount required for a down payment grows continually. Apartment List calculates that in most major metros in the US it would take millennials over 20 years to save enough for a 20% deposit. This factor puts a down payment out of reach for around two-thirds of this generation. As a result, they would need to rent.
The second factor is the lack of inventory in the US property market. Although listings have improved slightly this year, the number of properties available at entry level remains well below demand. And those houses on the market attract a lot of interest and their prices rise as a result.
US buy-to-let potential long term
The Apartment List report concludes that for around two-thirds of millennials the inability to save enough for a down payment “effectively puts homeownership out of reach entirely”. The alternative for this giant generation (around 73 million people in the US) is renting a property.
This would suggest that the percentage of millennials who will always have to rent will be considerably higher than the 11% cited in the survey. The potential for US buy-to-let investment https://youtu.be/kTL4_PuBBlw is therefore corresponding high and over the long-term, particularly in areas with strong job creation and employment prospects.
(Source: Apartment List)