These days, white picket fence dreams are on pause and renting is trending for Millennial and Gen X millionaires.
The number of U.S. millionaire renters tripled from 2015 to 2020 — and it’s a trend that continues to grow, according to Rent Cafe.
In California, the number of millionaire households choosing to rent rather than own increased from 2015 to 2020:
- 17-fold in San Francisco; and
- four-fold in Los Angeles, according to Rent Cafe.
Millionaires choosing to rent —known as lifestyle renters — are renting with bigger budgets to live in higher quality apartments and socially cultivating environments.
However, millionaires aren’t the only ones setting aside the homeownership dream in exchange for renting. High-income households who earn at least $150,000 per year are choosing to rent higher quality apartments, too.
The top California cities with the most high-income renters include:
- Los Angeles, with 82,600 households;
- San Francisco, with 80,000 households;
- San Jose, with 34,600 households; and
- San Diego, with 33,500 households, according to Rent Cafe.
Millionaire and high-income renter households will only continue to grow in this era of unattractive mortgage
With jobs just recently recovered from the 2020 recession, another more significant economic recession has already latched itself onto the jobs and housing markets. Thus, millionaires and high-income households won’t be budging to buy a home anytime soon.
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The rental housing trends of 2022 are carried forward into 2023
Homeownership takes a back seat
The housing market is currently unattractive with its on-and-never-really-off again high mortgage interest rates.
In the first week of March 2023, the average 30-year fixed rate mortgage stands at 6.65%, well above the average rate of 3.76% a year earlier. The resulting loss in purchasing power has been devastating to homebuyers and spilling over into home prices — a continuing tumble from their May 2022 peak well into 2025. Thus, would-be homebuyers are halting at the sight of overpriced homeownership and taking the scenic wait-and-see approach instead.
Not to mention, the high cost of living is putting Californians in a rock and a hard cost-burdened place as they are spending more than 30% of monthly income on rent. Renters are better off saving to buy a house in a market more aligned with their best financial interests.
Thousands of high-income renters in California are waiting for the right time to buy, which won’t be until 2025-2026 when prices bottom and begin their recovery.
Of note, unlike current homeowners, most of these renters have yet to form bonds with any practicing real estate agents — in other words, they’re going to need an agent. That’s where you come in.
Real estate agents can expand their fees from real estate services by giving renters a chance. Agents who build relationships with renters now are building a solid source of income in the future.
Real estate agents can download and distribute firsttuesday’s free FARM letters: Buy versus rent comparison analysis and Tired of the pitfalls of renting? Become a homeowner!
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