Millennials homeownership is 8.4% lower in comparison to older generations when they were the exact same age, says a report done by the Urban Institute. Given that homeownership is now the epicenter of wealth building, it is becoming problematic for the future financial expectations of the country’s largest ever-growing generation. The relatively low ownership of homes by millennials is a confluence of socio-economic trends that serves as an obstacle to many. Student loans, the great recession, delayed parenthood, funds for home maintenance, and location preferences when looking for a home are some of the socio-economic reasons why millennials prefer renting rather than buying.
The Aftermath of Student Loans and Economic Recession
In today’s world, almost every bank offers mortgages. However, in spite of the availability of funding for homeownership, student loan debt hinders many millennials from owning a home. Most of them fall short of the main requirement in the mortgage agreement known as the Debt-to-Income (DTI) ratio. It is the percentage of your monthly mortgage to the gross salary. Unfortunately, many get disqualified due to high DTI. In addition, is the inability to balance between loan repayment and the mortgage down payment. Low income and escalating rents pose a big challenge on saving for down payments and at the same time repaying the student loan.
The great economic recession that hit the country a decade ago also left many in fears. A report done by Mortgage Bankers Association said more than 1.2 million homes were lost to the recession. Most young people became more critical about the merits of owning a home due to falling values and foreclosures.
The Ease of Relocating to a New Area
For millennials, flexibility in one of their primary reasons why they rent. Their lifestyle mainly drives it. For instance, they save and use their funds in life enhancement such as traveling and entertainment. Other small pleasures of life like eating out, and indulging in fancy restaurants in their everyday life contributes to them renting rather than buying. Others are forced to rent due to the nature of their job. A good example is being reassigned to a new locality due to promotion. Exploring new career opportunities such as changing employment is also a significant factor with millennials when it comes to deciding whether to rent or buy.
Delayed Marriage and Parenthood
In the mid-20th Century, most couples got married in their early twenties. More than sixty years later, the age has risen close to thirties. As a result, many young people are not in a rush to have kids. Findings done by researchers shows that marriage increases the chance of owning a house by 18% and having kids by 6%. However, personal preferences such as pursuing career advancement and economic hardship have largely contributed to the change.
Millennials can rent or lease anything in this era such as cars, clothes, land or even music. The view of ownership is fading away, and the tendency has been extended to homes. That’s why the question of whether to “Rent or Own?’’ has gotten many millennials contemplating when they begin their personal and career life.
