The Zillow Consumer Housing Trends Report 2023 is out. Some of the insights this year’s report contains will surprise no one—for example, demand for rentals still massively outstrips supply.
Having said that, there is also valuable new information for real estate investors. In a nutshell, during 2023, the typical U.S. renter is someone who is older than the norm and has slightly different preferences and expectations from the previous generations of renters. Let’s zoom in on the details—and what they mean for investors.
Renter Demographics
In the past, renters have tended to be younger than homeowners because of the long time it can take to save up for a down payment on a home. However, while just over half (51%) of all U.S. renters are under the age of 40, the average age of a renter is now a mature 39 years old.
That’s older than the average first-time homeowner, who is 35 years old, according to the National Association of Realtors (NAR), but the average age for first-time homebuyers was 29 in the 1980s. The average age of renters who haven’t moved in the past year, i.e., they’re renting long-term, is even older, at 41.
This older age is consistent with the falling affordability of homeownership and reduced inventory of homes to buy.
The percentage of renters among household decision-makers predictably shoots up in more expensive regions of the country. For example, 39% of household decision-makers are renters in the Northeast, but only 24% are in the Midwest, a region with lower home prices.
Regional income variations also make a huge impact on the distribution of renters across the country. Twice as many people rent in the South (36% of all renters) as opposed to the Midwest (18%), and the reason for this is almost certainly tied to income disparities.
The average salary in Minnesota is almost $56,000, but it’s just above $40,000 in Mississippi. According to the Zillow survey, almost half of recent renter households (48%) make under $50,000 per annum, so there is undoubtedly a strong link between renting and income.
The survey points to a possible explanation for the lower overall income levels of renters: About a third of renters (30%) are single-person households and have never married. However, the survey also shows that more than 50% of renters are married. It is more likely that the lower income of renters, in general, is due to a combination of factors, including regional economic disparities.
What Are Renters Paying Now?
According to Zillow, the median rent for a one-bedroom apartment in the U.S. is currently $1,253 per month, while the median rent for any type of rental housing is $2,000 per month.
Again, there are huge regional variations. Median rent in Philadelphia is $1,600; in Jackson, Mississippi, it’s $1,100. Coastal areas continue to be some of the most expensive in the country for renters, while the South generally remains more affordable, the pandemic-era migration to the Sun Belt cities notwithstanding.
How Renters Feel About the Homes They Live in Right Now
One of the standout insights from the Zillow report is that the majority of renters feel that the home they’re renting could do with at least some updating. Overall, 67% said they felt their home needed updates, with 18% saying that the updates their rental needed were major.
This partly has to do with the types of housing available to renters. Most rentals in the U.S. are apartments in small buildings, single-family detached homes, or condos. These tend to be older properties that need more repairs.
In contrast, large multifamily buildings are the buildings renters find to be in the best condition. Almost half (45%) of renters who have an apartment in a large multifamily building (50-plus units) say their home was ‘’like new,’’ while only 27% of renters rated their single-family home this way.
However, this doesn’t mean that most U.S. renters prefer living in larger multiunit buildings. In fact, most gravitate toward apartments in small buildings. Of the renters whose preferred rental property is an apartment building, 42% would prefer a building with fewer than 10 units, while 36% would like a medium-sized building of between 10 and 49 units.
| Home Type | Share of Renters |
|---|---|
| Apartment in a smaller size building (fewer than 10 units) | 18% |
| Apartment in a medium size building (10-49 units) | 17% |
| Apartment in a larger size building (50 units or more) | 17% |
| Single-family detached house | 29% |
| Townhouse/rowhouse | 7% |
| Duplex/triplex | 6% |
| Manufactured / mobile home | 3% |
| Room in shared housing | 2% |
| Boat, RV, van, etc. | <1% |
Investors, take note: While an apartment is the single most popular type of dwelling people like renting (54% of all renters name apartments as the type of accommodation they hope to rent), most do not want to live in a huge building. And they’re prepared to look for what they want rather than settling. According to the survey, most renters end up in the type of home they initially planned to rent.
Plans to Move
Every landlord wants to know how long they’ll have their tenants for. The survey provides some valuable insights into renters’ moving tendencies.
The truth is that the vast majority of renters do plan to move sooner rather than later, with homebuying plans most often being the reason. Of those who took part in the survey, 72% said they planned to move within the next three years. The share of renters who are considering moving imminently or within the next year is huge: 54%. The share of renters who have no plans to move is declining and is currently 15%, down from 20% back in 2018.
Interestingly, renters’ plans to buy have increased despite high property prices and mortgage interest rates. Only 34% of renters said they were planning to buy a home in 2018, and the percentage is now 43%.
One of the reasons for this is undoubtedly that a large share of renters belongs to the millennial generation—people aged 29-43. These are folks who are determined to achieve the settled lifestyle associated with homeownership despite the increasing unaffordability of this option.
The harsh reality, of course, is that many of them will rent for longer than they anticipated, regardless of their current plans. People now rent for an average of six years before buying, up from 2.6 years in the 1970s. Their desires are the same as 50 years ago, but the economic landscape has shifted dramatically. Most renters who continue renting cite affordability as the key factor in their decision.
Use of Digital Tools/Demand for Them
Despite the increase in the use of digital tools in the rental sector, they haven’t replaced in-person tours. What the figures suggest, though, is that renters are now very good at doing their online research before going to see a home in person, which now results in fewer in-person tours. Most renters (74%) end up doing one to four in-person tours. Looking at five or more homes is now uncommon, with only 8% of renters doing this.
However, the number of renters willing to sign a lease without seeing a home in person has also declined. It is now 19% versus 21% in 2018. Moreover, most renters still sign their lease on paper (52%), although the same percentage say they would prefer to do this online. The demand for digital lease signing is growing, but slowly. At this point, it isn’t an essential factor in renter preferences.
Digital rent payments are where a shift in preference is significant: 60% of renters now pay their rent online, and 69% say they would prefer to, up from 57% in 2018. The inconvenience of writing checks or making cash payments is almost certainly a factor in this preference.
What Renters Believe to Be Highly Important in a Home
Has the COVID-19 pandemic left a lasting impact on renter preferences? The answer is a resounding yes. Years of isolation and boredom during the pandemic have resulted in a cohort of renters who want to live in lively, walkable neighborhoods with a sense of community and access to leisure activities and shopping. While the old priorities, such as proximity to family and commutable distances to work, have remained stable over the years, the rise in new priorities is very noticeable.
In 2018, 55% of renters said that they wanted to live in a walkable neighborhood; the percentage is now 61%. A sense of community or belonging mattered to only 33% of renters five years ago; now, it matters to 42%. Access to services, leisure activities, and shopping is important to 56% of renters, up from 47% in 2018.
| Share of Recent Renters who Consider each Neighborhood Characteristic Very or Extremely Important | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 |
|---|---|---|---|---|---|---|
| Close to family and/or friends | 36% | 37% | 38% | 39% | 37% | 39% |
| Close to shopping, services, and/or leisure activities | 47% | 50% | 51% | 49% | 49% | 56% |
| Close to public transportation | 36% | 35% | 34% | 31% | 33% | 37% |
| My commute to work or school | 58% | 57% | 55% | 52% | 56% | 59% |
| In a walkable neighborhood | 55% | 56% | 55% | 56% | 57% | 61% |
| Offered a sense of community or belonging | 33% | 34% | 34% | 35% | 39% | 42% |
These shifts in renter priorities are in line with the overall post-pandemic migration patterns: away from the largest cities and toward smaller but still vibrant metro areas. Renters, even if they don’t plan to rent for very long, want more than just a place to crash after work. They desire a fun and friendly area to call home.
Final Thoughts
The biggest takeaway for real estate investors from the Zillow report is that, as squeezed financially as they are, renters know they have choices. They prefer well-maintained homes in good neighborhoods with a vibrant, community-oriented feel. Affordability continues to be a key concern, and investors who can tick all three major preference boxes—affordable for the area, in good repair, and in a good neighborhood—will reap the rewards of lower tenant turnover, higher rent yields, and lower vacancy rates.
As ever, understanding your regional market specifics is essential. One in three adults in the U.S. are renters, and the numbers will continue growing. What you need to know as an investor is who your typical renter is: Are they older or younger? Are they looking for a family home or a one-bedroom apartment? What is their typical income range? Once you’ve figured out these key parameters, you will be able to invest more wisely and profitably.
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Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.
