Millennials have no desire to be homeowners.
USA Today reported apartment lease renewals hit an all-time high of nearly 54% in 2016. This is up from 52.9% in 2015 and a more-conventional 45% in the mid 2000s. The nation’s homeownership rate, on the other hand, fell to 62.9%—the lowest it’s been since 1995, according to the U.S. Census Bureau.
The reason for the trend is two-fold: Millennials are faced with student debt and expensive home buying options, which drives them into metro areas where developers have started putting up luxury apartment buildings.
Real estate research firm CoStar released a report in August that found many luxury apartments across the nation are left vacant, growing from 3.4% four years ago to 5.5% last month.
Then there’s a reluctance to move once millennials settle into apartments. This reduces the number of available apartments in American cities, RealPage chief economist Greg Willett told USA Today, and rents rise as a result.
“You’re unlikely to relocate if it’s a big struggle to find a vacant apartment in your preferred neighborhood at the price point you can afford,” Willett added.
An estimated 330,000 apartments will be built this year, a slight increase from the 230,000 built in 2015, USA Today reported. But with more developers building on expensive land, Willett said affordable apartment complexes won’t be profitable.” Meaning the high rents stay.