o you’re in that unpredictable age-range. Some of your closest friends are getting married. Others are on their second or third child, while some haven’t even decided what college program to enroll in yet. Your best friend just bought his second house and you’re still renting your studio apartment. Owning a home has been considered a lifelong accomplishment for many decades; however, there’s one demographic that isn’t keeping up with the homeownership trend. In fact, more Millennials are delaying the purchase of their first home, getting married, and having kids. Let’s find out why Millennial homeownership is a thing of the past.
You’re Paying Someone Else’s Mortgage
Even today, buying a house is often considered a measure of financial success. And when it comes to renting, there’s always a passionate debater that causes a dispute over why renting is “stupid”. A common argument for buying is, “Why would you pay monthly rent to a landlord instead of paying a mortgage towards a house you at least own?” In reality, there are several financial reasons why renting could be the better route for Millennials. How did our world believe for years that homeownership is the best financial move we could make, to now thinking it’s one of the worst financial moves?
Millennial Homeownership: Let’s Talk Money
A rule-of-thumb is that one's mortgage payment should not exceed 25% of their monthly income. Well, when we’re talking millennials, this isn’t going to be easy to make happen because the affordability gap is widening between home values and income levels. Can we also talk about security deposits? Yes, renters may have to pay a damage deposit equal to one month’s rent, but when purchasing a home, you’re required to have a hefty down payment. We’re talking 15-20% of the property’s value. You pick - a one-time payment of $1,000 or closer to $25,000?
Millennial Homeownership: Let’s Talk Relationships
Things are just different now than they were in the 50s and 60s. Millennials aren’t getting married at the same rate our parents were. In 2018, less than 60% of people aged 25 to 34 lived with a spouse or partner, versus 80% in 1967. It’s life events like getting married or having children that trigger big decisions like buying a home. So yeah, the changing dynamic of getting married and having children means Millennials are delaying, or completely crossing off the purchase of their first home.
Millennial Homeownership: Back to The Money Talk
Not much to say here. Just go take a read of our article on student debt. It’s no surprise that it’s now a financial burden on Millennials trying to classify themselves as a proud homeowner. It’s also the Millennial group that’s struggling to find employment, putting additional strain on paying off those loans.
You Do You
This debate could easily go on forever. Both renting and buying definitely have their individual financial advantages, and even though your parents might be breathing down your neck about it, owning a home isn’t right for everyone. So what, you’re renting. You have zero maintenance costs or repair bills. You don’t have to pay property taxes nor an interest rate on your mortgage. You have no bankrupting down payment to fork over. You have more flexibility in where to live. And you likely have access to amenities, such as gyms, pools, underground parking stalls, and more. What exactly are you missing out on?
At the end of the day, you might find yourself in a situation where it’s smarter to rent, and other times, buying might work in your favour. Rather than becoming one of those passionate debaters, it’s helpful to do your research, crunch the numbers and do what’s ultimately going to feel right for you.