Are Young Adults Being Priced Out of the Market? The Realities of Today’s Rental Landscape
Anya’s Market Bites:
Young adults today are navigating a challenging rental market. Recent data shows that over half of individuals between 18 and 25 are “rent burdened”—meaning they spend at least 30% of their pre-tax income on rent. According to a Zillow analysis, this figure was at 58% in 2022, a small improvement over previous generations. Millennials in this same age bracket a decade ago faced a 60% rent-burden rate, largely driven by the aftermath of the housing crash.
The reasons behind this persistent rent burden are multifaceted:
Limited Rental Supply: Kenny Lee, Senior Economist at Zillow, points to the longstanding shortage of rental housing as a primary factor. A lack of sufficient rental inventory has led to high competition, keeping rents elevated.
Pandemic-Driven Demand Surge: Although rental burdens had started easing, the pandemic reversed that trend as demand skyrocketed. This demand surge made it difficult for housing markets to provide sufficient inventory.
Wealth Disparity: John Campbell, a financial accounting professor, notes that household wealth has increased, but unevenly. Young adults typically lack the two main drivers of wealth—homeownership and stock market investments—making it difficult for them to build financial security.
These factors result in young adults paying a significant portion of their income in rent, leaving less for savings. As Jordan Levine, Chief Economist at the California Association of Realtors, explains:
Impact on Homeownership: High rent burdens delay savings for a down payment, postponing the transition to homeownership, which is a key step in building wealth.
Widening Wealth Gap: As young adults continue to rent, the gap between them and homeowners widens, further inhibiting wealth-building opportunities.
The good news? Levine believes there’s industry-wide agreement on the importance of increasing housing supply to address these challenges. Specifically, a push to build more starter homes can help make homeownership more attainable for young adults.
In the end, supporting a housing market that aligns with the needs of younger generations will require strategic growth and inventory expansion. With efforts focused on meeting this demand, the next generation of buyers may finally find more accessible pathways to homeownership and long-term financial security.
(Source: MarketPlace)
All the best,
Anya Derebenskiy
(949) 942-5183
Oh, by the way…if you know of someone who would appreciate the level of service I provide, please call me with their name and contact information.
DRE# 02209693
