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High housing prices leave more would-be buyers renting

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A rental vacancy sign in front of an apartment in San Francisco.

As younger, higher earners stay in the rental market longer, it can limit their chances to build wealth and price out lower-income people. Justin Sullivan via Getty Images

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The share of first-time homebuyers hit a historic low last month. The flip side? More millennials with relatively high incomes are continuing to rent, according to a new study from the listing service RentCafe. It found a jump in the share of what it calls lifestyle renters last year.

The share of rental applications from people in their late 20s to early 40s with above-average incomes, defined as more than $50,000 a year for an individual, spiked by 20% in 2021.

“Maybe five, six years ago, they would be out buying homes,” said Doug Ressler, manager of business intelligence at RentCafe parent company Yardi Matrix. “But two things have come into play — first of all, the availability of housing, and also the astronomical rise in house prices.”

The trend of young people renting longer has grown over recent decades, but during the pandemic, it expanded beyond pricey coastal metros to smaller and midsize cities.

Renting has its benefits, according to economist Gray Kimbrough at American University, but it can deprive young people of an important opportunity to build wealth.

And, he said, the shift ripples through the market.

“People might be bidding up older apartment buildings that used to be rented by people with lower incomes,” Kimbrough said. “And so that was much more affordable housing when those people weren’t going after that housing.”

After dipping in 2020, rents rose sharply this year, increasing by double digits in some markets.

“If we were able to build more, and have enough housing for people who are renting or buying, then we don’t have that pressure on that sort of housing,” Kimbrough said.

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