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Lots of very smart folks on this CD forum so I would appreciate insight. Maybe things have changed and I am looking at things totally wrong.
People love to bash the Millennials for all sorts of things, such as blaming them somehow for the state of the economy (because they apparently "sent all the jobs overseas" before they were born or of voting age... right ) or claiming that they are all "lazy" for not having great jobs (the ones the previous generation eliminated) or "entitled" for expecting hard work to pay off. While the OP's question isn't a bash, I mention the general attitude towards Millennials since there's often so little effort made into understanding them when bashing them is easier.
What's forgotten in all the fun of angry old farts bashing other people for the problems they created is the facts of life for Millennials. They have less job security than their parents - far less - with much higher critical costs of living for things like: education, housing, health care, and so on.
Combine those two factors together, and it should be no wonder why Millennials are reluctant to marry, have kids, or buy houses. It's not some astounding shift in human wants or needs, nor is it "proof that them thar Millennials are lazy an irrespunsible!" It's just basic math. When your income sucks, your job can vanish at any moment, and no amount of "bettering yourself" seems to make a difference, why the heck would anybody saddle themselves with a house, children, etc?
Oh goodie, a boomer wondering why on earth millennials don't just go buy a house. It could be that we have massive student debt because the cost of education skyrocketed, we graduated in a horrible economy (thanks for that, boomers), the cost of living has increased, and we can't afford a 20% down payment.
Sorry, this is a pet peeve of mine--people who think millennials aren't buying things because we don't want to. Sure, some don't want to, but largely we just can't afford it. I pay the equivalent of a mortgage every month in student loans. We will buy homes (and cars, and whatever else economists want to complain we're not buying now) once we can get the money together. It's just going to be about a decade past the age when our parents bought homes because, as a generation, our economic situation is radically different than our parent's. Unless you'd like to give us some money from your pensions or social security (which we also won't have) for a down payment?
Edit: I thought some numbers might help, because I have realized in talking to the older generations that they don't really realize just how much more expensive our education was compared to their's. I dug up the old UNC tuition numbers. In 1985, the oldest number I could find, tuition and fees for an in-state student was $794. Plugging this in to the CPI inflation calculator says this is the equivalent to $1,797 in 2017 dollars. Today, tuition and fees for an in-state student at UNC is $8,834. That's just tuition and fees, not counting housing and books, etc.
I don't know where you think your parents' generation started in life but I had $20,000 in student loans (in 1977 dollars) in 1977, at up to 11% interest, and no savings. There was no other way for me to finance a graduate education - my parents had already put me through college and didn't have any more money.
I bought a house in 1985 with 5% down and a 13.375% interest rate. Yes, you read that right. You can still get a loan with 5% down and the interest rate is around 4%. I realize home prices are higher but so are salaries - my first job paid $13,200 a year. By the time I bought the house my salary was up to about $40,000.
If you live in San Francisco, you might as well forget it - house prices are ridiculous. But if you're in Georgia, as your nickname suggests you are, consider buying one. At 3% inflation your rent will double in 23 years and quadruple in 46 years - and inflation could be higher than 3%, since the government has been borrowing like there's no tomorrow.
For me, it's really hard to say as I am in the minority of folks my age (28 and husband is 31). I did not have a 401K for several years at my job, so we took a portion of our savings and put a downpayment on a starter home here. And it certainly helped that both my husband and I lived rent-free prior to our home purchase.
Looking back, I think it was a decent decision as we've seen 10%+ yearly appreciation on the home for the three years we've owned it. For now, it seems to be a much better deal than renting (an equivalent apartment in our immediate area would run $1,500 to $2,300/mo, depending on the amenities. In contrast, our total costs (mortgage, taxes & insurance) come in at $1,350/mo.
However, it's been extremely hard to ignore the hundreds of thousands of voices all talking about how EVERYONE is moving here to DFW area / Texas.. how there's not enough inventory, oh wait.. guess what on top of that interest rates are rising!
We keep listening to these voices and have done a bit of house browsing to see if we should go ahead and upgrade to our long-term / forever home (my husband and I both have very stable jobs). A home that checks most of the boxes in an area with a favorable commute to both of our office locations - we're looking at around $550-650K in today's market standards.
It is really a tough pill to swallow because most of these homes, if you would have been looking at them 3 years ago when we first purchased, would have literally been 30 to 40% cheaper homes here. And with the $550-650K price tag, you're roughly looking at $11K/year in property taxes, which absolutely increase ten-fold each year.
In the end, we are deciding to wait for a few more years and continuing to "pay ourselves first" by maximizing all of our retirement accounts and tax advantaged spaces while we have a significant amount of time for those to grow, but continuing to add to our "forever home" fund by accelerating payments on our current mortgage.
I am just not convinced that the current home prices are sustainable, especially for our area (and contrasted with as time goes on, more Millennials will be the top house buying pool and we all know the story - less job security, saddled with student loan debts, less income/higher costs of living, etc. etc.)
But maybe the pricing is justified and I'll be kicking myself in a few years, who knows. But even with a very high income for our general age group, we'd be pushing 2.5X income on a mortgage that size and I'm not sure how comfortable that feels (especially being a native Texan and not being accustomed to medium/high cost of living situations).
I'm a 25 year old millennial and Im sure a lot of my attitudes come from coming of age during the great recession. I feel lucky that I wasn't 5 years older as it would have hit me even worse.
The research that I've done on home ownership shows that in general it isn't a great investment. Not historically at least. It makes sense if you want to live somewhere and plan on staying there for long enough to make the cost worth it, sure, but who knows where I will be in 3-5 years? What if I need to move for work and there is another downturn and I cant sell my house?
When I do buy it will probably b a duplex for passive income or a condo to cut down on commute, that is if I can ever pay my student loans off.....
I don't know where you think your parents' generation started in life but I had $20,000 in student loans (in 1977 dollars) in 1977, at up to 11% interest, and no savings. There was no other way for me to finance a graduate education - my parents had already put me through college and didn't have any more money.
I bought a house in 1985 with 5% down and a 13.375% interest rate. Yes, you read that right. You can still get a loan with 5% down and the interest rate is around 4%. I realize home prices are higher but so are salaries - my first job paid $13,200 a year. By the time I bought the house my salary was up to about $40,000.
If you live in San Francisco, you might as well forget it - house prices are ridiculous. But if you're in Georgia, as your nickname suggests you are, consider buying one. At 3% inflation your rent will double in 23 years and quadruple in 46 years - and inflation could be higher than 3%, since the government has been borrowing like there's no tomorrow.
You got a post grad degree for only 20k in debt? I mean I know this is 1977, but still, that is a good deal!
Most Millennial's parents can't put them through undergrad as yours did, although those are pretty crazy high interest rates.
You got a post grad degree for only 20k in debt? I mean I know this is 1977, but still, that is a good deal!]
Actually, it was the most expensive MBA program in the country, and the $20K included living costs. In 1977 the median household income was $13,572 and the median per capita income was $5,730. (Households were much larger then.)
Everyone pays property tax, Louie. Some pay it to a landlord who then passes it on to the taxman, others pay it directly to the taxman and most of them get a tax deduction for doing so.
but the majority of homeowners never realize that deduction since more than 1/2 of homeowners can't exceed the standard deduction
The value of income tax deduction for mortgage interest driving homeownership is one of the most oversold concepts in existence.
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) or claiming that they are all "lazy" for not having great jobs (the ones the previous generation eliminated) or "entitled" for expecting hard work to pay off. While the OP's question isn't a bash, I mention the general attitude towards Millennials since there's often so little effort made into understanding them when bashing them is easier.
