The nation's youngest adults will spend more than $2 trillion in the next several years on rent and mortgage loans, according to a recent report by The Demand Institute.
The number of new millennial households formed from the beginning of 2014 through the end of 2018 is expected to reach 8.3 million. They are likely to spend $1.6 trillion on home purchases and $600 billion on rent during that time period, or "more on a per-person basis than any other generation," the report said. The total is expected to equal one in every four dollars spent on housing over that period.
"The Millennials and Their Homes: Still Seeking the American Dream," is based on 18 months of research including interviews with 10,000 U.S. consumers, of whom more than 1,000 were millennials, and an analysis of housing market data from 2,200 U.S. cities and towns. It found that contrary to popular belief most millennials--born between the early 1980s and the early 2000s--nurture the traditional aspiration of purchasing a home and living in the suburbs.
"As more of these young adults increasingly venture out, on their own," most will rent, according to the report. However, so far nearly all already have cars and the vast majority plan to buy a home in the future, the report finds.
Research findings show this generation has many unique housing preferences that are important to housing finance, said Louise Keely, president of The Demand Institute and senior vice president at Nielsen Holdings N.V., a global information management company. The Demand Institute is a consumer research nonprofit that is jointly operated by Nielsen and The Conference Board.
"A fundamental question about millennials is whether their coming of age in the Great Recession has shaped their goals and aspirations to be different from those of previous generations," Keely said.
This generation faces "unique financial challenges of homeownership today resulting from graduating into a weak job market with growing student loan debt," agrees Jeremy Burbank, a vice president at The Demand Institute and Nielsen, which is likely why many young adults see alternative housing finance options, such as "single-family rentals and rent/own hybrid contracts such as lease-to-own" as their path to homeownership.