Most Millennials Will Spend Almost $100,000 on Rent Before Turning 30
The next largest generation to enter the housing market, the Millennials or individuals born between 1982 and 1996, are on track to become the most rent-burdened generation ever. As rents continue to skyrocket, a RentCafé study shows that Millennials will likely continue to pay 45% of their total income toward rent, a figure closing in on $100,000, before turning 30.
Based on data from the US Census Bureau, Millennials pay on average $92,600 in between the ages of 22 and 29, or the equivalent of more than two 20% down payments on a national median-priced $199,200 home (Zillow). Comparatively, Generation X spent about $814,000 (in 2017 dollars) on rent before turning 30, 60-year-old Baby Boomers spent $72,800 (in 2017 dollars), and 70-year-old Baby Boomers spent $66,900. Despite the fact that Millennials are the highest-paid generation over the 8-year span, they spend 45% of their income on rent, compared to the 30% Gen Xers spent and the 36% Baby Boomers spent during the same age period. Proportionately, from ages 22 to 30, Millennials earned $4,500 more than Generation X and $10,900 more than Baby Boomers but paid nearly twice that difference in rent with $10,400 more than Generation X and $21,600 more than Baby Boomers.
Rental woes are only worsening for the next generations. According to Trulia, rent increased 3.1% in 2017 in most major metropolitan areas and a shocking 19.6% since the end of 2012. Younger Millennials currently aged 22 to 29 are expected to pay $97,400 in rent before turning 30, compared with the $90,500 spent by older Millennials over 30. Generation Z is expected to pay over $102,000 in rent. The cycle of long-term renting continues to be fed by insurmountable student debt, and home price appreciation continuing to impact the ability to save for a down payment. Zillow reports that “while mortgage payments are more affordable on average than monthly rent payments, renters are struggling to buy a home due to perceived down payment barriers.”
With the down payment hurdle pushing homeownership farther and farther out of reach, Millennials may need to rely on other sources to transition from renting to owning. HomeFundMe™ by CMG Financial is one way Millennials are able to collect compliant funds for down payments from family, friends, and others wishing to contribute. HomeFundMe can also function as a registry for a wedding or other milestone event. To learn more about HomeFundMe visit www.homefundme.com.
Sources: CNBC, CNBC, HousingWire, RentCafé