The changing relationship between Americans and their homes is one of the most prominent societal shifts accelerated by the pandemic.
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Previous generations of Americans were likely to remain in the same job and place for decades, eventually settling down, buying a home and living in it for most of the rest of their lives.
Owning a home was a safe and stable way to live and the most assured method for building wealth. Wealth accumulated through building equity in the home, which could be sold for retirement, and through maintaining lower expenses when their mortgage was paid off. This is what many still see as the American dream.
The gig economy, work-from-home opportunities, and the higher value placed on experiences over possessions are shifting the landscape. The idea of establishing a permanent home in one place has become a distant memory of past generations for millennials.
For many millennials, the new American dream is one which reflects the world we live in today, global and connected, and who we are: adventurous, open-minded, curious and independent with short attention spans.
We can spend a couple months experiencing a foreign country, so why not? After three years in the same neighborhood, maybe it’s time to move across town to explore new restaurants, bars and people. Our opportunity and desire to travel and experience the world is in stark contrast to previous generations’ desire to settle down, making the idea of buying a home for ourselves to settle in an idea of the past for many of us.
A 2019 study from home services software company Porch found that while baby boomers have moved an average of once every 5.7 years and members of Generation X move once every 3.7 years, millennials relocate once every 2.2 years. And, millennials clearly plan to continue this lifestyle, with 73 percent anticipating another move within the next decade compared to 58 percent for Gen X and 43 percent for boomers.
A report that same year by Zillow reached similar conclusions. The study found that in 1960, the percentage of people 25 to 34 who lived in their current home for less than two years was 33.8 percent. By 2017, that number had risen to 45.3 percent.
Evidence of an increase in nomadic lifestyles among millennials can also be found via Airbnb, whose majority user base is in the 25 to 44 age group. The company released a report stating that stays of over 28 days were higher in September 2020 than the year prior. “We are seeing that length of stay is increasing,” said the company’s co-founder and CEO, Brian Chesky. “Fewer people are choosing to live permanently in one location.”
The desire to live without a permanent establishment is innately human. Humans were nomadic for many centuries—we only settled down because evolutionarily we had to, to build the infrastructure necessary to continue to progress as a species.
Given all this, it’s clear that for millennials, the importance and practicality of a “forever home” has been greatly diminished, as young adults are increasingly likely to question the logic of residing in the same place for many years.
That being said, a home continues to be one of the best investments an individual can make: How can a nomadic generation take advantage of the benefits of owning real estate?
Easy: They can buy a home as a rental property. To accommodate this, the dynamics of how we buy homes will change. We won’t be looking at a home as the perfect place for ourselves to live, but as a perfect place to share with others. The rent you earn from the home you own can offset the rent you pay to live in the place you’re exploring.
We’re already seeing the rise of this trend. Investor-owned single-family homes are multiplying across the country. According to an article in Housingwire, investor purchases of single-family homes rose 4.8 percent year over year in the first quarter, outpacing growth in every other property type.
While much has been made about mass institutional purchases of such homes, the reality is that single-family homes are very much a small investor phenomenon. According to an article in Slate, about 80 million of the nation’s 140 million housing units are stand-alone single-family homes and of those, about 15 million are rental properties. Of those 15 million single-family rentals, only about 300,000 are owned by institutional investors, and the rest, for the most part, are owned by individual landlords. And that is proving to be a valid investment strategy for those individual owners.
This summer, the The Wall Street Journal cited real estate analytics firm Green Street in estimating that “renting out U.S. single family homes will deliver annual returns of 6.6% – versus a forecast of 6.3% for industrial property.”
Given the current record-low interest rates, individual investors can use mortgages to amplify their return on investment to 15-20 percent per year, using an investment in real estate as a path to financial security and independence.
That being said, it’s important for more individuals to understand that there’s another way to build wealth through homeownership, one which doesn’t require the commitment of permanently living in the homes themselves. I’m rooting for more of us to catch on, so that many of us can retire with a home in hand to set ourselves up for the future.
We now share cars with services like Turo, and our homes using services like Airbnb. In the future, the meaning of “my car” or “my home” will be an even more fluid one than it is today. Along the way, single-family home rentals will help empower this generation with a more independent way to live, and a way to build wealth while living the newer, more adventurous American Dream.
Shri Ganeshram is the CEO and co-founder of awning.com, a platform that helps individuals find and purchase single-family rental homes by using machine learning to analyze real estate investment opportunities across the country. Prior to awning, Ganeshram was the second employee and first executive hire at Eaze, the largest on-demand cannabis delivery company in the world.
Illustration: Dom Guzman
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