Millennials Look at Housing, Expenses Differently Than Previous Generations

The millennial generation, defined as individuals born between 1981 and 1996, face a different set of life challenges than their peers in the baby boom or GenX demographic groups.

They experienced both the Great Recession and the COVID-19 pandemic before the oldest members of the cohort hit their 40th birthdays. And the generation still copes with the changing job market and skyrocketing real estate costs, which have prevented many 30-something individuals from attaining what their parents’ and grandparents’ generations described as the American dream of owning a home.

Glenn Kelman, CEO of the nationwide residential real estate brokerage Redfin, said that millennials may become known as “the roommate generation” because so many are either renting or living with their parents because of the high costs of housing.

"We have a whole group of Americans who can't afford homes, and that's happening right as millennials are coming of homebuying age," Kelman said earlier this year on the Barron’s Live podcast.

According to Forbes, members of the millennial generation are living with their parents longer than previous generations. For many millennials, student loan debt is overwhelming, and when they do leave their childhood homes, they’re far more likely to rent than to buy a house.

In the way of good news, Forbes reports that millennials’ average net worth and total net worth have doubled since March 2020, which marked the beginning of the COVID-19 pandemic. Most of that net worth, Forbes said, is connected to owning real estate and the significant changes in real estate values since the pandemic started.

The research aggregator The Tokenist says that millennials in the United States have an average salary of just over $47,000, but they have a higher debt-to-income ratio than any other demographic group.

Studies have found that millennials have different priorities than previous generations, opting to move around in their jobs rather than seeking longevity with one employer.

Sam Garrison, co-founder of the financial wellness company Stackin, said that many millennials have prioritized spending money on experiences such as vacations rather than saving up for a tangible investment such as real estate.

“The combination of external market factors and a shift in cultural values has deprioritized saving and emphasized pursuit of experiences,” Garrison said.

At LISC Greater Kansas City, one of our core missions is affordable housing, defined as housing in which the occupant pays no more than 30 percent of gross income for housing costs, including utilities.

When you consider that the average home price in the United States in the second quarter of 2022 was $440,300, according to the Federal Reserve Bank of St. Louis, it’s easy to see why so many younger Americans are opting to rent rather than buy.

While many millennials are at the point in their careers when their earning potential is rising, there is still a housing shortage for individuals and families who earn less than the average salary.

In the Kansas City region, we find that the greatest housing shortage is for residents who are at the 30% and 50% median income levels – earning $18,060 and $30,100 for individuals and families of four who make $25,800 and $43,000, respectively.

The price of renting is a bigger burden for low-income residents, especially people of color, as the average apartment rental price in Kansas City is more than $1,000 per month, according to Rent Café. The challenges increase when the renter has a family, as the average apartment size in Kansas City, Kansas, is 820 square feet, Rent Café reports.

LISC Greater Kansas City’s goals related to affordable housing include several prongs, including increasing the availability of quality affordable housing, preserving the affordability of existing structures, and influencing local, state, and national housing policy and funding.