Gen Z Has Lower Ownership Expectations, Rents Will Fall Except In Florida

Last week, I posted about trends in multifamily housing and I relied heavily on Zumper’s end of 2022 rent report. Zumper is an online platform to search for apartments and I use it frequently. But I don’t use Zumper to find apartments to rent, but to track rental prices in markets across the country. The report tracks rent trends in 2022 and what 2023 might look like. When I am looking at permitting and population data, Zumper is a useful addition to track concomitant movements in rents as demand grows or falls. As 2023 takes off, Zumper’s 2022 data and look at this year will of ongoing value. I was able to catch up with Zumper’s co-founder and Chief Executive Office, Anthemos Georgiades to ask a few questions to elaborate on the data.

The report found that, “Today’s interest rates are driving even more people out of the home-buying process and chipping away at confidence in the idea that owning a home is part of the “American dream”. Over half of respondents believe the “new American dream” is being untethered to homeownership and over a third reported that rising interest rates have deterred them from buying a home.” Is this becoming a generational thing, or this entirely a function of interest rates?

If we break down our survey question which asks if respondents think the American Dream involves homeownership, 30% of Gen Z said “no” (compared to 27% of Millennials and 27% of Gen X), so the data supports that younger generations value homeownership differently.

The overriding trend is one of lifestyle choices and ‘access’ over ‘ownership’. Millennials are waiting until later in life to get married and/or have children, both life events that typically trigger buying a home.

For those that were preparing to get onto the housing ladder, the rise in interest rates has been an enormous blocker this year, there’s no denying that and you can see this in the mortgage application and approval data. But the reality is that ownership is just not as important to the younger generations as it has been historically.

This seems like a silly question, but can you confirm that rents do, indeed, “rise and fall.” In today’s policy world, rents are constantly “skyrocketing” even when they aren’t. Your data from Boston is a great indicator; rents plummeted during the pandemic and then rose in 2021 to the same levels they were before the pandemic. Yet these rises panic policy makers. Can you comment on how and why people think rents are always going up?

Yes, rents indeed rise and fall, but the gravitational pull across the US pre-pandemic was for rents to be rising in line with inflation, or just above inflation.

The pandemic and the explosion of new household formation in 2021 caused rents to surge, but you can see the trend pulling back down closer to growth rate of the 10 year average, where we expect it to settle in the next year.

In terms of an anomaly where rent can go down to levels not seen for years, San Francisco is a good example – rents have materially decreased, by almost $1,000 a month for the average 1 bedroom rental.

Can you elaborate on Florida. Much has been made of how Florida has become more Republican. Is there any truth to the suggestion that this is true? Why? And Orange County passed a rent control measure which is now in dispute; do you expect rents to keep outpacing incomes there? Why is Florida the exception in 2023?

Florida is a unique pandemic case study because it has for the most part held onto the people who moved there during the pandemic, whereas many other states saw a snapback when the world opened up again. Florida is consequently seeing rent prices increase even during the typically slow winter season. According to Zumper’s December data, nearly every city in Florida has posted rent growth month on month, which is very rare for this time of year.