Are millennials buying homes? A survey conducted on existing-home sales report by the National Association of Realtors in mid-June shows that millennials are not showing interest in the American dream of owning a home.
Rather, they are choosing to rent homes.
Why? Should Millennials rent or buy?
The housing market is not exactly making it easy for millennials to buy homes either. The results of the survey show that 60% of first-time homebuyers finding it hard to save for a house are millennials.
We get it. Millennials do not want to own a home. Many have argued this is due to high student loan debts, stagnant wages, and spending anxiety are the reasons why millennials much rather prefer to rent over buying.
Why I’m Not Buying
I personally, am a millennial and am a renter. I love renting a place because it provides me flexibility. I’m not tied down to a 30-year mortgage in an area I may not want to live in by next year. My rental apartment actually is month-to-month and I’ve been doing research on which city I will live in next. To me, renting provides me with freedom and that makes me very happy.
One thing is true, millennials do value being a homeowner. However, if you are a millennial, you first have to tackle the issues of making more money, saving up for a down payment, settling down, having kids – all of which seem to rank higher than the value of owning a home. I often wonder why would I own a home at 28 when I am not ready to settle down or start a family. I’m ready to start my own online business, and the thought of owning a home ties me down to one area for far too long.
Reasons Why You Aren’t Buying
1. Not Content At Work? Why Settle Down?
The US dollar is on a steady decline and so that means your dollar is worth less and with inflation rising yearly it is a sticky situation. Also, most millennials I have spoken to express that they are underpaid and overworked, due to lower salaries, and buying a home is the last thing on your mind. If you do not like your job you are currently in then why would you want to settle down in a home with a 30-year mortgage?
Millennials generally like the flexibility of being able to move to another city with ease and they can’t accomplish by owning property. If you do end up buying property and want to move, the price of your property may be less than what you paid for. In contrast, if you chose to rent, then have to worry about selling your property if you need to move.
2. You Have Student Loan Debt
Odds are if you are a Millennial that you probably are drowning with student loan debt. With most millennials in debt, taking on more debt may not sound fiscally wise. Since you are most likely still paying off your student loans, saving down for a down payment that qualifies you for a mortgage may not be in arms reach at this moment.
The cost of buying a house summed up with other additional costs like maintenance, insurance, and closing costs does not encourage owning a house. In addition, looking at the unemployment rate at an unchanging 5.5%, you might not be able to afford to buy a house. Odds are that you prefer to opt for rented apartments since it is not as costly as buying a house.
3. Spending Anxiety
Millennials, you probably witnessed the worst hit during the 2008 subprime mortgage crisis. You may have witnessed your parents lose their jobs and 1.2 million people lost their homes.
That has taught you to be more careful with your money. The decisions that you will make after witnessing the aftermath of the recession’s effects will be echoed for years.
While Millennials routinely answer polls as to why they are not buying homes by saying they are:
- Waiting until they get married
- Until they can afford it
Instead of spending that down payment on a home I would rather invest my money in other things such as a business venture or investments. I have seen the rise of the “entrepreneur” and many millennials would rather rent a home and invest their money in entrepreneurial ventures or simply save it. If you want to save money on housing (typically your biggest expense), check out how to live rent free and the fundamentals of house hacking.
Benefits of Being a Homeowners
1. Tax Benefits
Being a homeowner pays off big time when tax season rolls around. First-time homebuyers find some attractive tax incentives. Claiming your home and other housing expenses on your tax return can net you pretty good deductions—all of which is money renters will never see. Over time, the savings you net can be significant and can go back into improving your home, saving for the future, or used to finance vacations and other leisure activities.
Did you also know you can deduct $10,000 from your Traditional or Roth IRA penalty-free to help with the purchase of a home?
2. Rent It Out
Millennials who buy a starter home now have the opportunity to turn it into a rental property for a source of added income when they purchase their long-term home in the future. Instead of worrying about having to afford rent, why not invest in a property and rent it out to your peers?
Did you know you can create passive income by applying for fix and flip loans in order to begin investing in real estate properties?
Why Do Two-Thirds of Millennials Regret Buying a House?
It has long been said that owning your own home is the American dream.
According to the U.S Census, 64.3% of Americans own their own homes. However, a new report into millennial homeownership has revealed that 68% regret purchasing their property.
In comparison, just 34% of baby boomers and 55% of generation X say they have the same regret.
So, just why are millennial first-time buyers, feeling so disheartened at such a great achievement?
Cash flow problems after buying a home
41% of Millennials state that their finances are tight as a result of investing in property. Buying a home is a costly expense and once you’ve purchased the bricks and mortar, additional costs mount up.
This includes paying out for home insurance (although you can get cheap homeowners insurance through Lemonade), major appliances, and television subscription services. CNBC reports that the average Millennial-aged between 25 and 34 years has $42,000 of debt.
Lemonade Insurance offers a new approach to renters, condo and home insurance. They even give back up to 40% of unclaimed money to the nonprofit of your choice.
However, new homeowners can budget and manage their money much more efficiently by planning their purchases. Wherever possible save up for the goods you desire and when you require instant credit, utilize cards that offer rewards to maximize your gain.
Not the dream home
Space is something most American homeowners want more of and millennials are feeling the squeeze too.
44% state that their home’s space isn’t adequate enough for their family. However, it’s important to remember that compromise is an essential part of the house buying process.
With Zillow revealing that the median property price is $218,000, first-time buyers may not be able to get as much space as they want or need for that price. However, with careful budgeting, over time, you’ll find yourself in the position to either move up the property ladder or to renovate.
Millennials are savers not spenders
Millennials have lived through the financial crisis and have witnessed their parents and grandparents deal with the financial burdens.
As a result, 66% of millennials foresee their savings account as their future means of survival rather than investments, according to CNBC. However, being a homeowner puts paid to this. Gone are the days of being able to squirrel away several hundred dollars a month for a rainy day. In fact, one study revealed that 50% of millennials have no savings.
However, as a homeowner, you have a huge investment that you can fall back on at any time and that safeguards your future finances significantly.
A substantial number of millennials confess to feeling regret over their house purchase. And, while finances can be tight and your living space unpractical, it’s important to remember that homeownership is somewhat of a luxury and that your investment will set you up for life.
The Decision to Rent or Buy…
The decision to buy or rent a home is as personal as it gets. The herd mentality suggests that most millennials would not buy a house.
Explore your options, whatever you do, make sure it makes you happy and you can sleep with both eyes closed at night. In case you are ready to purchase your next home you should view the home buying guide.