The current housing market has created a myth that younger generations prefer to rent than buy. However, expert surveys show that the choice to rent is often a function of lacking affordability. Let’s look at how the future of homeowners—Millennials and Gen Z—view buying vs. renting.
“I’d Buy If I Could Afford It”
Recently, Millennials became a majority-homeowner generation. According to past trends, it took Millennials longer to reach this point as a generation than past generations, such as Generation X and the Baby Boomers.
However, it doesn’t seem like this was necessarily an active choice Millennials made.
According to a recent Zonda survey, 98% of Millennials want to become a homeowner at some point, if they aren’t already. That same survey showed that only 21% of Millennials chose to rent because they simply preferred renting.
A much larger portion said that they rent because they can’t afford to buy where they want or can’t afford to buy at all.
With the market coming off of its astounding sell-side highs, builders have begun offering more incentives to entice younger potential buyers.
The Role of Inventory in Buying vs. Renting
Several factors have affected inventory over the past decade or so.
- Higher interest rates have kept potential sellers from listing.
- Institutional investors and equity-rich buyers are purchasing multiple homes.
- Under-building following the 2008 housing crash has made options like starter homes less available.
However, builders can and have affected inventory in positive ways recently. For example, according to Builder Online, new homes make up 30% of all inventory. Historically, new homes have tended to hover around 10% to 15% of all inventory.
Build to Rent Could Be a Middle Ground
The Build to Rent industry has grown substantially, and it may be a solid middle ground for younger buyers who don’t yet own a home.
Well-built Build to Rent communities offer many of the amenities of homeownership (e.g. privacy, space) along with the sense of flexibility renting can provide (e.g., minimal maintenance).
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What About Gen Z?
Though Millennials comprise the biggest share of current and potential home buyers, builders are also starting to consider the needs of Gen Z buyers.
Consider some early stats about potential Gen Z buyers:
- 72% intend to own a home someday.
- 56% are intentionally saving money for a home.
- Younger new-home housing markets (e.g., Houston) also tend to have younger potential buyers.
Though affordability is still a big obstacle for Gen Z buyers, the desire to own a home is strong. This could be a boon for new-home builders, especially in areas where development has already been booming, such as the South and Southwest.
Buying Is Preferred, Along With Good Customer Service
Between the two younger generations, homeownership is still a huge part of the American dream. And new-home construction continues to grow in popularity as these buyers come of age. Builders can take advantage of these desires by continuing to build quality homes.
As you build quality homes, it’ll be important to set expectations and offer peace of mind, especially because younger buyers have had to work so hard to achieve homeownership. A new home warranty from 2-10 Home Buyers Warranty (2-10) can help you set expectations and provide peace of mind from Day 1 and onward.
Finally, another key aspect of appealing to these younger generations of buyers is to offer high-quality customer service, especially post-closing. With 2-10’s Front Line Warranty Service, you can deliver on better post-closing warranty experiences for your customers with easy-to-use technology and support.
Given the current market, providing these positive experiences can be challenging for builders, but failing to deliver can be even worse.
Conclusion
2-10 has helped builders protect themselves and their buyers from the unexpected for more than 40 years. We’re going above and beyond to help builders offer outstanding post-closing service that younger generations of buyers expect through our Front Line Warranty Service.
As younger generations pursue homeownership, they’re showing a preference for new homes. 2-10 can help you protect your profits, promote your quality, and plan for a successful future by controlling what’s behind you.
