Apartment Complex: Why Gen Z Would Rather Rent Than Buy
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Homeownership may still be the American Dream, but for many younger buyers, that dream is increasingly being put on the back burner.
A recent survey of more than 2,000 Gen Z renters conducted in January by property management software company Entrata suggests that, while homeownership remains a goal for this generation — those aged between 13 and 28 — other priorities are overtaking it on their must-do list.
More than two-thirds of survey respondents (72%) believe that renting is a better financial option than purchasing a home. An even larger percentage, 83% of respondents, say that renting provides them the opportunity to save money for life experiences.
While affordability plays a significant role in this belief, there's also a shift in lifestyle choices that makes renting a more attractive option for younger generations. According to Virginia Love, industry principal at Entrata, this shift in perception has a lot to do with a generation that is charting its own course.
"They don't feel the societal pressures to say, I went to high school, I went to college, I got married, I bought a house, I had a baby, I had another baby, I need a bigger house," Love says in an interview with Money. "They're breaking with that traditional path and doing things their own way."
It's that desire to move away from the expected life pattern that motivated Gabe Cervantes, who grew up and spent most of his life in the San Francisco Bay Area. Although his job in Palo Alto entailed lots of travel and he was rarely home, he was still considering buying a house in the area.
Then COVID hit. Between 2020 and 2022, according to online brokerage Redfin, more than 30% of prospective homebuyers took advantage of the dramatic drop in mortgage rates to move to new cities in search of more space and affordable homes. While many took advantage of the golden buying opportunity presented by the pandemic, Cervantes saw a different opportunity.
"It was at that moment when I realized all of the conditions were set up for me to do away with the notion of trying to be a traditional homeowner, and saying let's forge a different path and see what happens," Cervantes says.
With the need to go into the office gone and his job going fully remote but still requiring significant travel, it didn't make much sense to keep paying the high costs of "living" in a place where he spent very little time, nor did it make sense to buy anywhere else.
For him, the question stopped being when will I buy a home? and turned into, do I have to buy a home? And the answer was no.
Why renting can be more attractive than buying
Buying a home requires a big financial investment, and current market conditions are tough due to high home prices and elevated mortgage rates. Compared to slightly older generations, Gen Zers are also either starting out or in the early stages of their careers and may not earn enough to support homeownership.
Home prices increased by nearly 50% nationwide during the pandemic and have continued to inch higher over the past two years. As of August, the most recent month for which data is available, the median home sales price was $422,600. As of October 2, current mortgage rates are averaging 6.30%, and the monthly mortgage payments average over $2,000. Additional expenses, such as rising insurance costs, also add to the financial burden of homeownership.
These higher purchasing costs are more difficult for younger buyers to afford. The median income of Gen Z is $84,000, whereas that of younger millennials — those between the ages of 29 and 34 — is slightly more than $108,000, indicating that older generations are in a better position to afford today's high home prices.
The difference in earning power plays a significant role in determining who can afford a home purchase. According to the NAR, only 3% of all homebuyers are Gen Z By comparison, younger millennials, those within the 26 to 34 age group, make up 12% of all homebuyers.
The average rent, on the other hand, is $1,755, according to RentCafe, an apartment search site, which makes renting a more affordable option.
Testing out new neighborhoods
While many Gen Zers may be on the outside when it comes to affording a home, there are others who are willing and ready to buy but are searching for the right place to call home. For these young homebuyers, renting provides the flexibility to move from city to city, exploring and trying out different lifestyles in new places before choosing where to settle down.
That's what Aaron Uscilla and his girlfriend decided to do. His family is from Connecticut, and hers is from Puerto Rico. They wanted to try out cities on the East Coast that offered a warm climate and access to water and that were within easy flight back to their respective families. They spent three months living in Airbnbs in each of several cities, including Arlington, Virginia, and Charleston, South Carolina, before eventually deciding to settle in the Tampa-St. Petersburg area of Florida.
"It was enough [time] to get acclimated… and understand if we like moving around in the area, and [understand] the general vibe of each city," Uscilla says.
As for Cervantes, he's in no rush to buy a home. Instead, he has spent the last three years trying out different cities, exploring new areas, and searching for the right place to call home.
Cervantes uses a company called Landing, which offers fully furnished, all-inclusive rentals that include utilities and Wi-Fi. All he needs to do is pack his suitcases and move when he feels it's time. Although the rental costs can add up over time, it's worth the premium.
"It's about having the flexibility and the freedom to really live the lifestyle that brings enjoyment and purpose, not just to my work but to myself as an individual," he says.
He's currently in his 15th city. Although he was moving every month at first, he's extended his stay in each place to three to four months. Cervantes says this gives him time to meet local residents, try new experiences that may be outside his comfort zone, and learn more about himself and what makes him happy.
"The end goal is to find something, somewhere, someone worth settling down for," Cervantes says. "Until that happens... let's just go explore."
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