Home ownership for millennials in America is at an all-time low. Millennials are generally regarded these days to be between the ages of 25-34, which is the prime time to buy your first home. But as of 2017 and 2018, there are still more people renting in this age bracket than buying. Also, a recent Rent.com survey of 1,000 renters from 18 to 34 showed that most of them do not want to buy and would rather rent.
What Is Going On with Millenial Home Buying?
Financial experts say more millennials are delaying home ownership because there are tighter credit standards than a decade ago, for starters. Gone are the days when one could easily get 100% financing home loans without documenting your income. Today, almost all home loans require a down payment of at least 3% to 5%. You also need to show the mortgage company what your income is with tax returns, pay stubs and W-2s.
Another reason for millennials delaying home ownership is they are living a different lifestyle than generations past. These days, it is more common to delay getting married and having children into one’s 30s and even 40s.
Still another reason for the delay in buying a home is prices for homes are up in 2018. Homes in many parts of the country now can cost well above $300,000 which is beyond the means of many millennial buyers. This is a big problem for people who have lower incomes and also do not have equity in another property to bring to the table. It can take a long time to save up that down payment, even if you are putting down much less than 20%.
Rent.com also found these reasons why millennials are still renting and not buying:
- It’s cheaper. For many younger people, the cost of renting each month is less than owning a home. Four out of ten millennials surveyed said affordability was the main reason most of them choose to continue to rent. While you can make a strong argument that buying a home long term is a better financial move, many younger people just see renting every month as cheaper short term than buying.
- More freedom. Approximately 20% of those surveyed said they liked to rent because they had more freedom. For most people who rent, it is possible to move when the lease is up every year. On the other hand, most people who own their home are locked into their residence until they can sell it, unless they can afford two house payments, and who can?
- No maintenance costs. If you have ever had a serious maintenance problem in a rental property, such as a roof or an air conditioner, it is nice to be able to just call the landlord and have them pay for it. Home maintenance is one of the most underestimated parts of owning a home. It is not just small things like fixing a toilet or a leaky faucet. When the roof goes, you are looking at a $10,000 expense.
- Many younger people do not have children and like to live in the big city and in the trendier neighborhoods. The only way to afford living in these areas for these lower income folks is to rent. If you want to live in a trendy part of your city, you may be like the 8% of those surveyed in the Rent.com study who said they would rather live in that hot neighborhood than not live there at all.
- Difficulty getting a mortgage. Another common reason millennials are not buying is they cannot, or think they cannot, get a mortgage. Perhaps they have credit problems or do not have enough income to get a home loan. However, it is important to remember that many people who have ‘bad’ credit may actually be able to be approved for a home loan. Many people assume if they have a 600-fico score they cannot get a home loan. This is not always true. FHA loans in particular are an option for people with past credit issues.
- Do not want commitment. Many young renters do not want to commit to living in a certain neighborhood at this point. There is something to be said for this: If you first get to a new city or area, renting a few apartments or houses in different areas is a good way to get to know where you may want to settle down later.
The bottom line is that millennials these days are not buying homes as quickly as older people did when they were their age. It is possible that this trend will change when they get married and start to have children. But for now, millennials are renting more than they are buying.