Millennials and homebuying is a topic that has been prevalent in the real estate industry for years.
Why aren’t they buying as much as expected? While student loan debt and low inventory is often blamed, the amount they spend on rent on average may also be deterring them from being able to afford a home. By the age of 30, the average millennial will have spent $92,600 in rent between ages 22-29.
According to Rent Cafe, on average, millennials spent 45 percent of their income on rent, 15 percent higher than the suggested 30 percent on housing. While millennials aren’t the only generation to spend significantly more on rent between the ages of 22-29, they have spent the highest percentage. The report found that Generation X spent 41 percent of their salary on rent during ages 22-29, while baby boomers spent 36 percent.
The average millennial made $206,600 in that time period. Meanwhile, Generation X made an average of $202,100 in the time period, and spent $82,200 on rent. Baby boomers made an average of $195,700, and spent $71,000 on rent. While millennials may have earned more in that time period, the percentage of funding spent on rent was disproportionately higher than previous generations.
The report also found that rent costs are increasing for younger millennials. For those millennials 30 and older, they spent about $90,500 on rent in their 20s, while millennials under 30 are spending, on average, $97,400 before they turn 30. Younger millennials are spending 47 percent of their income on rent during that time period, compared to older millennials, who spent 44 percent from ages 22-29.
The report forecasts that Generation Z will spend $102,100 in rental costs between ages 22-29.