For countless Americans, owning a house is part of the American dream, but many younger generations are taking a different path, sometimeseven avoiding homeownership altogether. As of the end of 2018, just one in three millennials ages 34 and under owned a home, a rate that is between 8-9% lower than the corresponding homeownership rates of prior generations. What’s more, of millennials ages 23 to 38 who did buy a home, 63% admitted that they regretted the purchase.
Homeownership has many perks, including independence, stability, and privacy when compared to renting or apartment living, but it also has its drawbacks. While the expense of homeownership is one obvious barrier, other factors are affecting young adults’ decisions to rent for longer periods of time. Some of these obstacles are deterring or preventing younger generations from buying a home for many years.
Why Homeownership is Challenging
One of the major barriers to buying a home is its overall expense. Buying a home requires significant savings to cover a down payment, closing costs, mortgage payments, taxes, and insurance. When younger generations are still paying off large student loans, saving up a large amount of money at the same time can be difficult. Millennials who are newly out of school may still be working their way up the job ladder, too, so their current positions may not pay the type of salary they would need to save up for a home.
Once a younger person has closed on a home, they then need to be prepared to face all sorts of other expenses. Dealing with flooding, mold, electrical issues, and just general home maintenance are expenses that renters don’t have to worry about or pay for. Similarly, homeowners may need to insulate their homes for winter and cope with large heating bills which are often included in a rental’s price.
In addition to these more standard maintenance costs, unexpected problems can cost thousands of dollars, even with homeowner’s insurance. A roof repair or replacement, broken well, or damaged septic system can all be expensive repairs, making it even more important for homeowners to be able to set aside a large savings fund. Some younger generations aren’t in a financial place to be able to set aside these types of funds, making investing in a home intimidating and impractical.
Why Younger Generations Are Renting
Given the expense of purchasing and maintaining a home, it’s no wonder that younger generations tend to spend more years renting. But there are additional reasons why millennials are deciding against homeownership.
It’s much easier to save for a home when you’re married, and married couples are 18% more likely to purchase a home than people who are unmarried. However, marriage rates among young adults have dropped. In 1990, young adults’ marriage rate was 52%, but as of 2015, that marriage rate is only 39%. With a lower marriage rate, fewer young adults may make that decision to buy a home.
The time period between 2005 and 2015 saw many millennials flock to busy cities. In large cities, renting is far more practical than buying, especially for young professionals who have limited savings. The price of properties in cities is forbidding for young adults, and renting gives them the flexibility to move about, explore, and easily relocate for new work opportunities.
How Young Adults Can Save for a Home
Homeownership isn’t out of reach for young adults who dream of owning a home, but they’ll need to be deliberate and realistic about their plans. Young adults who have just graduated from college need to be wise about their career and life choices to set themselves up well financially. Saving up to buy a house is a long-term project, but if adults set their sites on smaller, more practical properties, they can make that dream come true sooner.
Strategically investing money early on in their lives can help young homebuyers to develop their financial stability and savings. Homebuyers may need to live frugally or even work multiple jobs to save up for a down payment on a home. In some cases, young adults may be able to rely on help from family to help bolster their down payment funds.
While many young homebuyers focus on purchasing a home for their family, real estate investing can contribute to their financial independence if done wisely and carefully. In fact, by buying and investing in real estate, homebuyers may be able to save up enough money to be able to purchase a larger, more valuable home for themselves than they could otherwise afford.
Purchasing a home is a big decision, and it’s one that younger generations are tending to put off. With so many factors affecting homeownership, the decision to buy a home is one that each individual will have to make for themselves.
Jori Hamilton is a writer from the Pacific Northwest who has a particular interest in social justice, politics, education, healthcare, technology, and more. You can find more of her writing work here https://writerjorihamilton.contently.com