Do People Prefer To Buy Or To Rent Homes...

buy rent From single-floor, ranch-style homes in the 1960s to ‘the bigger the better’ 1990s’ two- or three-story houses with full basements – properties sure have changed over the years.

Back in the 90’s it seemed like everyone was buying a home rather than renting. In 1997 they changed the tax law to make owner-occupied homes basically tax free when sold. With all the tax deductions that came with home ownership and increasing property values, it seemed to make sense to own rather than rent.

Fast forward a decade. The housing bust hit people hard. Circa 2008 people were losing their homes to:

Adjustable rate mortgages adjusting higher
Job losses
Declining property values
Tightening of bank lending standards

And all the problems that come with a massive recession.

Many people wanted nothing to do with home ownership.

They rented instead.

Or they moved in with Mom.

Or they looked for roommates to share expenses.

Now we’re well into 2018. Today’s trend seems to be more practical. Apparently, people are looking for properties with a smaller size; sort of a middle ground between the 90’s and the crash. McMansion-owning baby boomers – with whopping 8,000-square-foot houses in the 90s – are now looking for properties that are just the right size.

Aside from the change in housing preferences, people’s mentality about owning a property have changed as well. Unlike in the 1990s, renting has now become a more viable option—whether as an intentional choice, due to financial constraints or the number of houses available. The most recent tax plan has also curtailed the tax advantages of homeownership.

homeowner Not to mention people are a little more cautious about buying a house in a rising market.

The number of homeowners in the United States have been decreasing in the last eight years or so - from 69% in 2004 to 63.7% in 2015.

Many people think that millennials are the ones responsible for this change in trend. But they’re not the only ones to blame.

All generations are taking part in the decline of home ownership. Millennials, baby boomers, and Gen Xers are all looking into renting as a lifestyle choice. Buying a property is no longer a priority for many Americans, no matter which generation they belong in.

So which generation buys or rents properties?

Baby Boomers

Most baby boomers grew up living the concept of the American Dream, where properties were more affordable. So, are baby boomers against renting since they’re more likely to own a property? Not quite.

A report from Chicago Tribune says that most baby boomers would rather sell their McMansions when their all of their children leave the house. They’d rather rent or buy an apartment or townhome that has full amenities so they won't have to clean a large house, mow their lawns, or keep up with a mortgage. They’d also prefer to live closer to restaurants, shopping centers, and more.

Males and females have different opinions when it comes to living arrangements. 31% female baby boomers, 65 years old and above, would rather rent to accommodate their flexible lifestyle. That compares to only 17% of male baby boomers of the same age group.

Generation X

While the Gen Xers couldn’t afford the same flexibility in terms of their lifestyle and housing compared to the millennials, they aren’t left behind.

rent Gen Xers would rather rent than buy a property. The housing crisis hit this generation hard. The older Gen Xers were right at the age to trade up in 2008 and free up the starter homes. The younger Gen Xers would be moving into those starter homes. So they were keenly aware of housing being a risky investment.

That’s why the housing market is seeing a 23% drop in ownership for people in their late 30’s compared to 10 years ago.

Renting isn’t helping Gen X’ers either. As there is more demand for rentals, rents are increasing. Great for us investors... not so great for Gen X’ers who are trying to save for a down payment.

There is another factor why Gen Xers aren’t keen about homeownership. The same Harris Poll discovered that more than a third of Gen Xers would rather rent than own a home as long as they’ll have the flexibility to move when needed to explore more opportunities and avoid the responsibilities of maintaining a home.

Millennials

Unlike the previous generations, millennials became homebuyers later than the baby boomers and the Gen Xers. The number of millennials homeowners have decreased faster than any other generation. There may be two reasons for this:

High student loan debt, and;
Millennials don’t see the significance of owning a home.

Most millennials today would rather save up for a better lifestyle than owning a house. Almost half of all people ages 18 to 34 prefer saving and spending their money to travel and explore than becoming homeowners.

Millennials also want to be able to keep or enhance lifestyle pleasures over buying properties. In fact, 47% of millennials would keep on renting if this means that they’d still be able to afford eating out or drinking their vanilla coconut milk latte on a regular basis. For senior Americans, 65 years old and above, only 25% of them have the same mentality.

How This Affects Housing Investment

Many people are still vying to become homeowners, such as the Baby Boomers. However, it’s safe to say that not every generation will dip their toes in the housing market. And Baby Boomers are looking to downsize.

The reality is, more people these days would rather rent than buy. But as trends change, real estate investors keep up with the changes as well. The demand for rental properties can and will work to your advantage.

If you’re looking to make your way into the rental aspect of real estate, then you can start small by renting out a room in your own house. You can use applications such as Trulia or Airbnb to help you get started. Finding rental properties below market value may be very profitable in the long-term.

Fixing and flipping may be a little tougher in a market full of rentals. If you do prefer to sell a property and get out quickly, it may be worth looking into fixing it to ‘rent ready’ standards and selling it to a landlord. That may be a better alternative than making it immaculate for a homebuyer that may not even be around.