Millennials aren't buying homes, and it might not be because they can't afford them: Some actually prefer to rent instead
- Single-family rental homes are a hot commodity - and millennials and baby boomers alike are snapping them up, reported Diana Olick for CNBC.
- Some of these renters can afford to buy homes, but they don't want to deal with the hidden costs of homeownership.
- The millennial cohort is contributing to the generational trend of renting longer - and it shows how they're changing the American Dream.
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Millennials are renting longer - but it's not always because they can't afford to buy a house.
Some millennials prefer to rent instead of buy, and developers are creating communities of single-family rental homes to meet this growing demand, reported Diana Olick for CNBC.
Consider AVH Communities, which partnered with Bristol Group to build a gated community called Pradera in San Antonio, Texas, which consists of 250 new three- and four-bedroom homes that rent for $1,800 to $2,300 a month, Olick wrote. The average annual household income of Pradera's residents exceeds $100,000.
"We think there's a major shift in the demographics. Empty nesters are done taking care of their homes. They want to downsize, they want portability, mobility in the lease," AVH founder and CEO Mark Wolf told Olick. "The millennial household formation, they're not really dialed into taking care of a home, they want to go out and do the same thing that the boomers are doing, which is enjoy life, not work hard for their house."
In 2018, the number of single-family homes built for rent - 43,000 - hit a peak for the first time in nearly 40 years, reported Olick, citing the National Association of Home Builders.
Both millennials and older generations Olick spoke to said they didn't want to deal with the hidden costs of homeownership - renting is an easier way of life for them.
That's because homebuyers often need a bigger budget than they anticipate: New furniture, monthly fees such as property tax and homeowner's insurance, and repairs can tack on unexpected expenses.
Read more: 10 hard truths no one tells you about buying a house
Millennials are changing the American Dream
Owning a house with a white picket fence is no longer one of the defining parts of the American Dream, according to Olick. But millennials aren't just ushering in a new type of American Dream - by choosing to rent instead of buy, they're also changing what homeownership in America looks like.
For one, there's the matter of house size: Baby boomers, whose kids are now grown, are putting their large houses up for sale. But millennials don't want them, preferring smaller homes instead, reported Candace Taylor for The Wall Street Journal.
And regardless of whether millennials are choosing to rent homes because it's convenient or resorting to renting because they can't afford a down payment, they collectively represent a large cohort of their generation who are renting for longer. In some cities in the US, prospective homebuyers have to save for nearly a decade for a 20% down payment.
Some millennials are waiting so long to buy homes that they're bypassing the need for a starter home altogether. It doesn't help that starter homes are scarce on the market - and real-estate investors are swooping in with all-cash offers, proving to be tough competition for millennials, as Ben Casselman and Conor Dougherty reported for The New York Times.
Whether it's by choice or force, renting seems to be making its way into the new American Dream.
Are you a millennial who has chosen to rent, buy, or live in an alternate type of housing? Email this reporter at hhoffower@businessinsider.com to share your story.