Fewer Renters Transitioning To Homeownership Drives Higher Lease Renewals by Percent
Even though the edge of this cohort is aging into their 40s, they're staying in rental housing longer. Apartment lease renewal rates have been climbing over the last year, and they're currently in the 55% range. And a key factor influencing that trend has been the fact that fewer renters are transitioning into homeownership. That translates into a few things. The quality of apartment life has improved over the years with more services and amenities, higher caliber finish levels and family-oriented floor plans. Apartment developers have really improved their product lines to make apartments more appealing to tenants. This has, to a degree, delayed or greatly reduced the desire for homeownership for many young adults. Now, that's not to say that people in their 20s and 30s and 40s don't want to own a home eventually. But the gap between the quality of housing they can rent compared to the quality of housing they can afford has grown so wide, they see no need to rush and sacrifice. For example, the median price of a single family residence has increased by 6.1% over the last year and home prices are up almost 50% compared to the first quarter in 2020. The payment on a median priced home, including the estimated principle, interest, taxes and insurance is about $3,100 per month, while the average apartment rent in the US is about $1,830 per month. That's a difference of almost $1,300. So, as a result, a lot of millennials are choosing to delay their first home purchase. In 2010 the median age of first-time home buyer was 30 years old, in 2020 it was 33 years, in 2022 was 36 years, and in 2024, the median age of a first time home buyer was 38 years old. So the millennial generation has been delaying their transition into homeownership and there are no metrics indicating that this will change substantially over the next few years.
The domino effect is that home builders aren't adding single family houses because they can’t sale them and at this point, mortgage rates aren't showing any signs of a decline.
So, looking forward five years, it looks like the US will continue to face a housing shortage, and there will continue to be a significant affordability gap between homeownership and renting while at the same time, the quality of rental housing continues to improve. We believe, as many experts in this industry, that the demand for rental housing will remain strong. So while there's volatility all around, we at Goshen One are experiencing prosperity and peace of mind. Won’t you join us?
