The increase in housing and land prices had been slowly creeping to the point of no return, which was immensely hyperbole during the recent pandemic. This exponential increase in housing prices has caused the younger generation to prefer renting over saving for a house they own. In this article, we discuss Generation Rent and how it has affected homeownership trends to new horizons. Furthermore, we will also discuss how it has affected or improved living conditions and standards for Generation Rent and others overall.

Who are Generation Rent Individuals?

Generation Rent is born when people have immense difficulty saving monthly to eventually buy their own homes due to various reasons such as inflation, poverty, and economic and social changes. They are people, mostly the younger generation, who want independence and prefer renting over living with their parents or siblings. The main drive behind this decision is independence, but it also includes the inability to financially afford to pay for a homeownership or, eventually, a mortgage.

How is Generation Rent Spending?

While most may think that Generation Rent or millennials might be spending frivolously and their credit cards will be maxed out, it is untrue. This generation has been spending their money with care, where almost 9 out of 10 prefer spending using debit cards for regular stuff. In general, if the purchase amount exceeds $600, only then do they think about taking out their credit card.

Most of them think they are savers and not spenders, and that’s why they shy away from even making a credit card altogether. So, in the end, they are gearing towards a more responsible yet independent lifestyle so they are free to make decisions as they like.

Are Younger Generations Taking Longer Now to Move Out of the Nest?

On average most youngsters try to leave home under 25 due to education or as soon as they find a job. It had become increasingly difficult now when previously, as it was easier to start paying for a home and move out. It is indeed a milestone for Generation Rent to become independent as soon as possible.

It is much earlier for women to move out of their homes if they decide to move in with a partner. In other cases, Generation Rent finds co-homes or spends up to 40% of their salaries on rent once they move out.

The main issue this generation is taking longer to move out is having a stable income to afford rent, a suitable accommodation, or a roommate. The quicker they are able to do so, the sooner they start living on their own.

Why is it Difficult for Generation Rent to Afford a House?

The cost of living due to inflation is one of the prime reasons which has caused a considerable shift in their thinking. Despite earning more, they can’t afford even a premium on housing and thus have stopped thinking about it unless they start earning well. Furthermore, this has also caused them to stop spending on non-essentials altogether.

Trends of Homeownership by Generation Rent

Here are some trends affecting Generation Rent in buying their own home or at least depositing the downpayment.

Creativity in a Challenging Market

Previously young individuals would save at least 20% of the downpayment when considering applying for a loan for their own homes. Now the situation has changed due to the reasons we mentioned above. Almost half of Generation rent plan and spend their savings to buy a home on their own, while a much lesser percentage, such as only 10%, would take help from a friend and invest in homes this way. Most of these are ready to start investing as soon as possible and know if they can afford it in the next five years.

Roadblocks to Home Buying

Again due to inflation and the cost of living becoming really difficult to bear, most consider mortgages expensive and out of their monthly budget. Furthermore, it makes it more difficult when insurers have complex policies for younger blood due to the risks involved, and Generation Rent does not have a good credit score at the moment. The major roadblocks to enter a mortgage for most Generation Rent or millennials are:

·      Bad or no Credit – 37.8% of individuals

·      High debt-to-income ratio – 45.15% of individuals

·      Insufficient down payments or closing funds – 45.75% of individuals

·      Other barriers – 14.79% of individuals

What Generation Rent Seek in Lenders?

The best thing about Generation Rent is that they are overly research persistent and want to explore all their options and see what fits them the best. This is well understood in the lending community and thus supports them in guiding towards a better deal. It is primarily supported because of how greatly these individuals will refer if they get a good deal and better treatment. This care helps the brokers as well because it helps them gain more business and increases their credibility.

Co-Living Options

While some may see this as a deterrent to housing, they fail to realize that it makes Generation Rent independent sooner. Companies are investing in co-rental spaces along with HMOs and houses in multiple occupations to support this trend. Co-living and similar options allow the generation rent to find cheaper options to live while allowing them to socialize more easily. The lure of a community and excellent amenities are the tremendous pull.

Conclusion

It will take at least a few years more for the inflation to settle while salaries catch up. Until then, the cheaper options are more viable for Generation Rent instead of looking for ways to buy their own living quarters. Insurance providers also need to facilitate them with innovative policies that support them instead of just looking at their credit scores.

With better living conditions and lifestyle choices that Generation Rent can get in HMOs and co-living spaces, they have more room to save for future mortgages while staying independent earlier than before.