Why do so many millennials rent if we all agree that homeownership is a net positive?
NewHomeSource’s Millennial survey asked, and the top answer isn’t hard to guess – it’s expensive out there.
“People often think renters are ‘stuck’ renting. That is the case for many renters given high home prices and interest rates,” says NewHomeSource chief economist Ali Wolf. “For others, the beauty of renting comes down to flexibility in their living situation. While the desire to own a home one day is there for most renters, some just aren’t in a rush to buy.”
Here are the Top 5 reasons millennials are choosing to stay put in their rentals.
1. Low Affordability
Low affordability forces millennials to remain in their rentals because the high cost of homeownership—driven by rising property prices, increasing interest rates, and stagnant wages—makes saving for a down payment difficult. Many also face student loan debt and high living expenses, leaving little room for savings. Additionally, stricter mortgage qualifications and a competitive housing market further limit their ability to buy. As a result, renting remains the only viable option, even if it means dealing with rising rent costs and less financial security in the long term.
2. Waiting for Price Drops
Many millennials choose to stay in their rentals while waiting for home prices to drop, hoping for a more affordable entry into the housing market. With real estate prices fluctuating and economic uncertainty affecting interest rates, some believe that delaying their purchase will allow them to buy at a better price. However, this waiting game can backfire if prices remain high or interest rates increase, making homeownership even less attainable. In the meantime, they continue renting, often paying high rents without building equity, which can further delay their ability to save for a down payment.
3. Lack of Good Locations
A lack of affordable housing in desirable locations forces many millennials to remain in their rentals. Many prefer to live in areas with job opportunities, good infrastructure, and social amenities, but rising home prices in these locations make buying unattainable. While they might find cheaper homes in less convenient areas, long commutes, fewer job prospects, and lower quality of life deter them from purchasing. As a result, they continue renting in their preferred locations, even if it means facing rising rental costs and limited long-term financial benefits.
4. Uncertainty
Uncertainty about where they want to settle keeps many millennials renting instead of buying a home. Career changes, job relocations, lifestyle preferences, and personal relationships can all influence where they ultimately want to live, making a long-term commitment to homeownership feel risky. Purchasing a home ties them to one location, whereas renting offers flexibility to move as their priorities shift. This hesitation is especially common in a volatile job market or during life transitions, leading many to delay buying until they feel more confident about their future plans.
5. Still Searching
The process of finding the right home can be time-consuming and challenging, leading many millennials to stay in their rentals longer. With high housing costs, limited inventory, and competitive bidding wars, securing a home that meets their needs and budget can take months or even years. Many prioritize factors like location, size, amenities, and future resale value, making them hesitant to settle for a less-than-ideal option. Additionally, navigating mortgage approvals and home inspections adds further delays. As a result, they continue renting while searching for a home that aligns with their long-term goals.
