It’s well past time to stop blaming Millennials for avocado toast, but a new report finds they might be driving the cost of rents for single-family homes off the charts.
Millennials have become the dominant force in U.S. real estate, but the hurdles of the housing market—in terms of both supply and affordability—means more and more families are opting to rent single-family homes rather than buy them.
A recent Zillow report shows that rents for single-family homes have skyrocketed approximately 41% above pre-pandemic levels, while multifamily rents units have gained 26% in the same time period. The typical asking rent was $2,174 for single-family homes as of December 2024, while the typical asking rent was $1,812 for multifamily units, according to the report.
“Rent growth has eased, but rents are still too high,” says Orphe Divounguy, a senior economist at Zillow. He adds that while wage growth has outpaced the gains in rent costs for multifamily units, it’s still below the rent growth rate for single-family homes.
Meanwhile, the prospect of buying a single family home is receding for many due factors including paltry inventory in many markets, surging home home values, and the challenges of saving up a competitive down payment.
Higher home prices mean bigger down payments—and older renters
Just how prohibitive are home down payments these days? It’s enough of an issue that one of Zillow’s dashboards, focused on home affordability, includes a tool where you can look at the estimated time required to save up a down payment on a typical home during different time periods.
The tool works by estimating that you’re independently saving up a 10% down payment on a typical home by socking away 5% of the median household income each month.
As of November 2024—the most recent data available in the dashboard—it would take an estimated nine years to save up a down payment under these parameters. Compare that to the end of 2019, shortly before the Covid-19 pandemic, when the estimate was seven years.
We can’t talk about home affordability without mentioning mortgage rates. After the Federal Reserve slashed rates to effectively zero to support the economy during the pandemic, mortgage rates hit an all-time average low of 2.65% in January 2021. Then rates surged as the Fed tightened policy coming out of the pandemic, peaking at 7.63% in October 2023.
Now, despite the Fed’s three rate cuts in late 2024, the average interest rate on a fixed-rate, 30-year home loan has remained near 7% for months. Zillow’s Divounguy notes as we’ve seen American consumers struggling more and more with housing affordability, the age of the median renter has gone up.
“The age of a typical renter had been steadily but slowly increasing over time,” he says. “Then it jumped substantially between 2023 and 2024.” The median age of a renter in the United States was 42 years old as of 2024, up from 33 years old just three years prior.
High demand for single-family rentals, but not enough supply
Rents for single-family homes rose from year-ago levels in all 50 major metro areas that the report examined, while rents for multifamily units rose in 42 of those 50 metros.
“Right now, more multifamily units are hitting the market than at any time in the past 50 years, but detached homes aren’t seeing the same surge in construction,” Skylar Olsen, chief economist at Zillow, wrote when the report was released. “We’ve also got the large millennial generation wanting to move into a larger space. High and unpredictable mortgage rates and hefty down payments are pushing some to rent that lifestyle instead of buying it.”
The metros with the highest increases in single-family rental cost were Hartford (7.7%), St. Louis (7.6%), Cleveland (7.4%), Chicago (6.8%), and Indianapolis (6.6%).
Meanwhile, the metros with the highest increases in multifamily rental cost were Hartford (8.3%), Cleveland (6.3%), Providence (6.3%), Richmond (5.8%), and Chicago (5.4%).
As rents remain comparatively elevated, landlords are turning to concessions to draw in new tenants. These may include such promotions as months of free rent or free parking—and, with about 41% of rental listings on Zillow offering concessions, the report notes this is a record high.
Concessions are up compared to year-ago levels in 48 out of 50 major metros areas. The areas with the biggest increases in such listings are Denver, Louisville, Raleigh, Indianapolis, and Nashville, per the Zillow report.
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Homebuilder activity is a bright spot in a difficult market
With demand from prospective homebuyers remaining strong, even as pandemic supply chain snarls made construction more expensive and existing homeowners locked in with sub-5% mortgage rates now often termed the “golden handcuffs,” builders adapted, says Divounguy.
“They could have pulled back when mortgage rates more than doubled,” he says. “You could have seen builders pulling back for good because of concerns that they’d potentially see some sort of housing market crash. But they persevered, they changed the way they build.”
By that, Divounguy means we’ve seen smaller builds and taller builds hitting the market—for example, more condominiums and townhomes—in recent years. Builders have leaned into density as a way to reconcile strong demand and the reality of limited usable land.
“They did a good job of adapting to changing market conditions wherever they could,” he adds.
A necessary part of the solution will have to be local governments looking at how they can ease the way for more construction, says Divounguy, such as doing away with minimum parking requirements and minimum lot sizes.
The takeaway
Census Bureau data shows that at the moment, single-family homes only make up about 31% of the rental market. Increased demand for and upward price pressure on single-family rentals highlights the problems of the struggling U.S. housing market.
Here’s the good news: Builders keep increasing inventory, which is helping with affordability. Divounguy is also encouraged by how often the topic of affordability appears in the media and in conversations among government officials.
“You hear more about it in headlines, you see the federal government but also state and local governments talking about it and wanting to do something about it,” he says. “I think it’s the most we’ve heard about housing affordability in a long time.”
