Facing High Rents, One in Four Millennials Living With Their Parents

Rental prices across the country have contributed to a greater number of young adults moving back in with their parents, according to a survey by PropertyManagement.com.

One in four Millennials are living with their parents and of those, 55% have moved back home within the past year, according to a December survey of 1,200 millennials (aged 26 to 41).

Respondents said they did so to save money (51%) and that they couldn’t afford the rent (39%).

Despite wanting to own a home, 44% can only afford a 3.5% mortgage rate or less. Mortgage rates a few months ago topped 7% before recently falling to the mid-6s.

Economic Uncertainties Don’t Help Matters

Ben Creamer, Principal and Managing Broker of Downtown Apartment Company, tells GlobeSt.com, that these findings are not entirely surprising given what occurred in the market this year, as rents elevated quickly and priced some people out of certain markets.

“The current economic uncertainties we face don’t help the situation,” Creamer said. “In our downtown Chicago market, we have noticed a significant downward trend in rents in Q3 and Q4. Although this is generally the case, given the seasonality of the market, we did not see this downward trend in 2021.”

“With the additional supply coming to the market, we will likely see a more normalized market next year without the significant rent increases we experienced in 2022.”

He said a big question is whether more people move into the rental market given high mortgage rates and how that might dictate rents increasing next year.

“People tend to settle into the mortgage rates over time and will be accustomed to the 6% to 7% rates,” Creamer said. “But if rates get too high, it will drive more people to rent versus buy. If the rental demand increases, so will rents.

“I predict we will see more people moving in 2023 if inflation slows and there is – hopefully – more certainty across the broader economy.”

A Boost in Housing Supply Could Help

Kurt Carlton, President and Co-Founder at New Western, tells GlobeSt.com, that he thinks the only solution to the rising cost of housing and offering younger buyers the chance at a home is increasing the housing inventory.

“We have seen that relying on the creativity of the local real estate investor, who understands the opportunity in their backyard, is key,” Carlton said.

Renting Rooms in Houses Could Be Affordable

Many are using different and innovative strategies to add inventory – particularly rental inventory to the market at more affordable prices.

“We’re seeing our investors do things like buying a house and renting it by the room,” he said. “This offers a lower rental rate for Millennial type tenants who may have lost their job and need a more affordable rent. This strategy is a win-win because it also garners higher gross income for the landlord.”

Carlton said investors are buying houses and working with the local municipalities to drop in an ADU (an accessory dwelling unit, which is an additional, self-contained dwelling on a typical single-family lot). This adds a net +1 housing unit at a more affordable rate for the renter.