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Plenty has been written about soaring U.S. property costs. Over the past four years, house prices have swelled by 20 percent, fueled by low-interest rates, a limited supply of properties and an ever-increasing demand for homes. In cities like San Francisco — where homes are now more expensive than the pre-recession property bubble — the American dream of property ownership has turned into a nightmare. However, there’s still hope for first-time buyers trying to get on the property ladder. Millennials and Gen X members are snapping up vacation homes and generating a lucrative rental income.
There has been a dramatic shift in home ownership levels in recent years, with the number of Americans owning their property hitting a 48-year low in the second quarter of 2015. Saving enough cash for a home in a fast-moving market proves a difficult prospect for young adults, with many millennials and Gen X members opting to rent or live with their parents instead.
When Airbnb started in August 2008, it initiated the sharing economy, something that has changed perceptions on home ownership. Fifty-two percent of North Americans are now willing to share their own assets, and 43 percent would share from others. It’s not just property, either. Millennials are reluctant to buy music, cars and luxury goods, opting for services that provide access to products instead.
Despite house prices accelerating in the last 35 years, the median age of first-time buyers — 30.6 in the early 1970s and 32.5 in 2013 — has remained pretty much the same, according to Zillow; however, only 34.2 percent of young adults (aged 35 or younger) owned their home in the first quarter 2016. For some millennials and Gen X members, the cost of purchasing a property makes home ownership unattainable. Others just don’t want to own a home. Buying a vacation home and renting it on a platform like Airbnb gives millennials and Gen X members more flexibility if they aren’t ready to settle down or haven’t yet found a long-term career.
Vacation home sales have skyrocketed. In 2015, rentals made up 16 percent of all properties sold in the United States, with Florida the most popular state to buy a vacation home.
Why are they so popular? Owning a vacation rental provides young adults with a steady income stream every month, especially in cities like Los Angeles and Seattle — two of the most profitable locations for Airbnb investments. In cities like San Diego, young entrepreneurs buy property and generate a huge return on their investment. Newer properties, in particular, require little in the way of upkeep, allowing millennials and Gen X members to rent out their home and travel at the same time.
Vacation rental success stories have spurred more millennials and Gen X members to purchase property and make a second income. “Love It or List It,” a Canadian home design television show that airs on HGTV, created a spin-off dedicated to vacation homes in 2015. Over on the Travel Channel, “Extreme Vacation Homes” showcases the glitziest short-term rentals from around the world. Both shows are indicative of the vacation rental craze.
As young adults are less likely to purchase real estate than previous generations, many Millennials and Gen X members are avoiding the shackles of home ownership and generating significant income by purchasing and renting out a vacation home. Here at Pillow, we can manage your property for you, lessening the burden of vacation rental ownership.
By: Michelle Giuliano
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