Are Millennials Buying Homes? A survey conducted in mid-June by the National Association of Realtors on the Existing Home Sales Report shows that millennials are showing no interest in the American dream of home ownership.
Instead, they opt for rented apartments.
Why? Should Millennials Rent or Buy?
The housing market is also not making it easy for millennials to buy their own homes. The survey results show that 60% of first-time homebuyers who are struggling to save for a home are Millennials.
We get it. Millennials don’t want to own their own home. Many have argued that this is due to high student loan debt, stagnant wages and spending anxiety, which is why millennials far prefer to rent than buy.
Why I don’t buy
Personally, I’m a millennial and renter. I love renting an apartment because it gives me flexibility. I’m not locked into a 30-year mortgage in an area I might not want to live in next year. My rental apartment is actually month-to-month and I’ve been researching which city I’ll be living in next. Renting means freedom for me and that makes me very happy.
One thing is true, Millennials appreciate being a homeowner. However, if you’re a millennial, the first thing you need to address are the issues of making more money, saving for a down payment, settling down, having kids—all of which seem to rank higher than home value. I often wonder why I should own a home at 28 when I’m 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 has tied me to one field for far too long.
Reasons why you don’t buy
1. Not happy at work? Why settle down?
The US dollar is in a steady decline and that means your dollar is worth less and with inflation increasing every year this is a difficult situation. Also, most millennials I spoke to say they are underpaid and overworked due to lower salaries and that buying a home is the last thing on their mind. If you don’t like your current job, why settle in a house with a 30-year mortgage?
Millennials, in general, like the flexibility of being able to easily move to another city, something they can’t get with owning property. If you end up buying a property and looking to move, the price of your property may be less than what you paid for. On the other hand, if you have chosen to rent, you will have to worry about selling your property if you have to move.
2. You have student loan debt
If you’re a millennial, chances are you’re probably drowning in student loan debt. Since most millennials are in debt, taking on even more debt may not sound tax-wise. Since you’re most likely still paying off your student loans, saving for a down payment that qualifies you for a mortgage may not be within your reach right now.
The sum of the costs of buying a house with other additional costs such as maintenance, insurance and closing costs does not exactly make you want to buy a house. Additionally, with the unemployment rate remaining unchanged at 5.5%, you may not be able to afford a house. You’d probably prefer to opt for rented accommodation as it’s not as expensive as buying a house.
3. Spending anxiety
Millennials, you probably got the worst hit during the 2008 subprime mortgage crisis. You may have seen your parents lose their jobs and 1.2 million people their homes.
That taught you to be more careful with your money. The decisions you will make after witnessing the aftermath of the recession will be repeated for years to come.
While Millennials routinely answer surveys about why they don’t buy houses, they say:
- Wait 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 like a business venture or investments. I’ve seen the rise of the «entrepreneur» and many millennials would rather rent a house and invest their money in entrepreneurial ventures or just save it. If you’re looking to save money on housing (usually your biggest expense), check out how to live rent free and the basics of house hacking.
Benefits of being a homeowner
1. Tax Benefits
Being a homeowner pays dividends during tax season. First-time home buyers will find some attractive tax incentives. If you claim your house and other housing expenses on your tax return, you can get some pretty good deductions — all of which is money renters will never see. Over time, the savings you make can be significant and flow back into improving your home, saving for the future, or financing vacations and other fun activities.
Also, did you know you can deduct $10,000 from your traditional or Roth IRA penalty to help buy a home?
Millennials who buy a starter home now have the option to convert it into a rental property for additional income when they buy 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 co-workers?
Did you know that you can earn passive income by applying for Fix and Flip loans to start investing in real estate?
Why do two-thirds of millennials regret buying a home?
It has long been said that owning a home is the American dream.
According to the US Census, 64.3% of Americans own their own home. However, a new report on Millennial home ownership found that 68% regret buying their home.
In comparison, just 34% of Baby Boomers and 55% of Gen Xers say they regret the same thing.
So, why are first-time millennials so disheartened by such a great achievement?
Liquidity problems after buying a house
41% of Millennials say their finances are tight because of investing in real estate. Buying a home is a costly expense, and once you’ve bought the bricks and mortar, the extra expenses add up.
These include paying for home insurance (although you can get cheap home insurance through Lemonade), major appliances, and television subscription services. CNBC reports that the average millennial between the ages of 25 and 34 owes $42,000.
However, new homeowners can budget and manage their money much more efficiently by planning their purchases. If possible, save for the goods you want and if you need instant credit, use cards that offer rewards to maximize your profits.
Not the dream house
Space is something most American homeowners want more of, and Millennials are feeling the pressure too.
44% say they don’t have enough space in their home for their family. However, it is important to remember that compromise is an integral part of the home buying process.
Since Zillow reveals that the median home 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 will be able to either move up the real estate ladder or renovate.
Millennials are savers, not spenders
Millennials lived through the financial crisis and watched their parents and grandparents cope with the financial strains.
As a result, 66% of millennials view their savings account as their future means of survival rather than as an investment, according to CNBC. However, as a homeowner, it pays off. Gone are the days when you could waste hundreds of dollars a month on a rainy day. In fact, one study found that 50% of millennials have no savings.
However, as a homeowner, you have a tremendous investment that you can draw on at any time and will significantly secure your future finances.
A significant number of millennials admit to regret buying a home. And while finances can be tight and housing impractical, it’s important to remember that homeownership is a certain luxury and 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 home.
Explore your options, whatever you do, make sure it makes you happy and you can sleep with your eyes closed at night. When you’re ready to buy your next home, check out the home buying guide.