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 house. Rather, they are choosing to rent homes. 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 get a mortgage are millennials.
Many experts have argued about the reasons millennials do not want to own a house. Some experts argued that student loan debts, anxiety or fears are the reasons millennials seems to favor renting a home. Yet, other experts are of the opinion that the lack of commitment is the key factor why millennials are not buying houses.
Of a truth, millennials value homeownership, but first, they have to tackle the issues of making more money, settling down, having kids -- all of which rank higher in priority than the thoughts of owning a house. Millennials tend to ask themselves why they should own a house when they are not ready to settle down or start a family.
Reasons they are not buying
1. They want to move around because they do not like their jobs.
The purchasing power of the U.S. dollar is on a steady decline as the indiscriminate printing of money continues to water down the value of a dollar. To make matters worse, millennials are mostly underpaid and overworked, due to lower salaries, buying a house is the last thing on the mind of most millennials. Most of them believe they are under-paid and they will instantly jump ship if the find a better offer.
Therefore, most millennials want to stay light and mobile since it is not easy to move around when you own a property. You might be forced to sell the property at unfavorable terms if you relocate as part of a career move. In contrast, a rented apartment provides all the necessary social amenities and you won't have to worry about selling anything if you need to move.
2. Students loan debt
Millennials between 18-29 years of age report that they or someone in their household has student loan debt. With a trillion dollar in student loan debt, buying of house does not sound fiscally wise for millennials at a time when funds are low and debts are high. Most millennials are still struggling to pay off their student debts loan; therefore, saving for a down payment that qualifies them for a mortgage is not in anyways in their agenda.
The cost of buying a house summed up with other additional costs like maintenance etc. does not encourage owning a house. In addition, looking at the unemployment rate at an unchanging 5.5%, most millennials might not be able to afford buying a house. They prefer to opt for rented apartments since it is not as costly as buying a house.
3. Spending anxiety
Millennials were the worst hit during the 2007-2009 economic recessions because they had to contend with the effects of starting a career at the peak of the downturn. Hence, many of them have learned to be more careful with their money. The U.S. Department of Labor's Bureau of Labor Statistics (BLS) noted, "The decisions millennials make now in the aftermath of the recession's effects can reverberate for years." An expert at WMOption notes that a house is no longer an asset and "traditional investments do not provide the kind of returns commensurate with alternative investments"; hence, millennials would rather rent a home and invest their money in other stuff.
They closely monitor where to put in every penny they have -- the WMOption Twitter feed bears a testament to how financially savvy the average millennial has become. In addition, the availability of different products from different brands raging from technology to fashion makes spending among millennials unpredicted an issue, which makes owning a house not their best interest now. Many millennials have witness their parents struggling with their house payments or eventually losing their home. All this experiences has a major effect on them, which makes them more reluctant to own a house.
Rents are on a consistent increase
National Association of Realtors reported that over the last five years, a typical rent rose 15% while renters' income rose by 11% only. Bloomberg also reported in March 2015, that rental price is steadily soaring, the increase in rent might "nudge millennials toward homeownership... First time buyers made up 29% of existing-home sales in February, up from 28% in January and the first increase since November..." Since rent is on the increase and the economy is less than, robust millennials might start looking into buying of house as a safe financial investment.
Homeowners enjoy some tax benefits
First-time homebuyers would also find some attractive tax incentives. There are many tax benefits available for new homeowners throughout the time they spend in their home such as:
• Buying a home: first-time homebuyers are allowed by IRS to withdraw up to $10,000 from their traditional IRA (and even Roth IRAs) penalty-free to help with the purchase of the home
• Mortgage Interest: this is the interest payment you are allowed to deduct on any mortgage up to $1 million after you purchase a home
• Points: one point is equal to 1% of the principal loan amount
• Selling Costs: if you decided to sell your home,
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.