Home ownership has reached a five-decade low due in part to the fact that millennials have historically low ownership rates compared to other generations at that age.
Home ownership has always been a part of the American dream. So why aren’t more millennials willing to purchase a place to call home? Should they purchase homes or is it smarter for them to rent? There are several factors to consider.
The Relocation Factor
After the housing crash of 2007, many millennials began to realize home ownership may not be quite the American dream as it has long been touted by realtors and organizations who encourage home ownership.
In fact, home-buying may not be a good idea for the vast majority of millennials – at least not right now.
Not only does it represent a huge financial risk, but it ties you down to a specific area – which may not be very convenient if a higher paying job which required relocation came calling.
For those who want to focus on establishing their careers, some experts highly recommend renting.
Another expert doesn’t think there is a “correct” answer, it depends on each millennial’s individual circumstances.
How long do you plan on staying in the area or in this particular home? Except in rare cases where you’d be buying into a rapidly appreciating market, or you’re renovating a total fixer-upper, if you don’t plan on staying more than a minimum of 2-3 years, it probably makes more sense for you to rent.
The Debt Factor
While some millennials may not want to purchase a home, many simply are not able to because of debt. Lingering debt and financial worries play a critical role in the home-buying decision.
Despite millennials’ well-publicized low rate of homeownership, our index found 76 percent feel being able to save for a home remains important to achieving an ideal home life – but only 37 percent feel satisfied in their ability to save.
Any millennials who are thinking about purchasing a home will need to understand and then start building their credit score so they can qualify for a mortgage when the time comes.
Perceived job security is another contributing factor. And financially speaking, one needs ample money for a down payment, pre-paid items at a closing like property taxes, and also insurance and renovations.
Even if you have a stable income, your home shouldn’t eat up all of your money.
If it would take every penny of your savings to make a down payment on a home, and you’re not certain of your ability to replenish that in the future, you may want to factor that into your decision.
There are many loan programs out there that can help first-time home buyers with down payment assistance, or that don’t require a severed arm and leg in order to get a mortgage. But millennials should also consider their comfort level with the final estimate.
A home is a huge purchase and demands substantial responsibility in terms of monthly payments and ongoing upkeep, so it’s important to be realistic when it comes to assessing whether you can and should purchase a home.