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Research is showing that the millennial generation is forgoing the once cherished tradition of purchasing a home.
Student loans and not landing a decent paying job right out of school mostly. Although I must say by the time the loans are finally taken care of I could've just bought a moderately affordable house somewhere. It's hard to believe the kids coming up have had to pay even more.
Personally speaking as a Millennial I spent a lot of my younger years moving around and living life. Figured I was kind of screwed out the gate despite doing everything you're supposed to do in life to get ahead so it was sort of like an early retirement while I was young enough to enjoy it.
I'm leaning towards buying somewhere now once I find a place that I'd like to live long-term, but not because I'm really interested in buying a house. It's more a question of prices continuing to climb just about everywhere that it makes more sense to own.
It is a great disservice to recent and future generations that our educational system and family networks do not provide good basis for wise financial decisions.
Buy or Rent? I truly don't care. I just hope that people make the best decisions for themselves, in the short and long term windows.
I very much DO care that so many people have so little financial acumen and are easily led to dig deep holes in life without a plan for prosperity.
Pitroad, how much have you spent on home improvements over the years? Ever had to put on a new roof, or new deck? New water heater? Remodeled a kitchen or bath? Those are things renters don't pay for. Subtract whatever you've spent there in your equations.
We have been fortunate that we bought our house 20 yrs ago before the housing bubble, and live in an area where home prices pretty much only appreciate (Chapel Hill) but folks who bought 10 years ago in other areas might be wishing they had rented instead.
Be fair......remodeling kitchens/baths are 90% cosmetic upgrades, not required. Ever had a landlord stop by and offer to replace all the kitchen cabinets/add new granite countertops? Roof replacements are expensive but honestly are once in 20-30-40 year jobs. I have owned 3 homes and never replaced a roof (but it was motivation to cash out of one house because the roof was getting old! ).
I have never understood this argument. It's not like you can live for free somewhere and invest what would have gone into a mortgage into a mutual fund. You still have to pay rent PLUS whatever you would invest. Rents always go up while a locked-in 30 year mortgage does not. Yes a pure amount of money in a fund versus mortgage probably would do better, but the mortgage gives you a place to live.
You are ASSUMING that rent = mortgage PITI plus maintenance, and also ASSUMING that a person does not buy more than they would rent. I rent a room, what do you suggest, should we change the laws so that it is possible to buy a room?
Research is showing that the millennial generation is forgoing the once cherished tradition of purchasing a home. For many of us 'Baby Boomers' our greatest asset is the equity we have built up over the years by buying rather than renting. In my case several hundred thousand thousand dollars. If I had chosen to rent through the years and perhaps taken the easy route (no maintenance, freedom to move at will, etc) I probably would have payed about the same in rent as I did in mortgage.
I can see singles or childless opting for urban rentals and walk to work and bars but I can't really understand why families would choose to rent.
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.
Boomers' home value gains were driven by falling interest rates and increased mortgage availability.
Since we're basically on the zero-bound right now, in order to think that millenials will see the same gains boomers did, you'd have to assume that interest rates would be about negative 15% in 20 - 40 years.
I do know for my friends that student loan debt is definitely a factor as well as the fact that nobody works 40 years in the same job anymore - people switch jobs every few years or so that may require moving while homeownership requires commitment to a location for a certain period of time. Renting provides some flexibility there.
Loan debt is certainly a real issue.
Job transfers happen, but plenty of people move frequently even owning houses. My sister is married to a career military guy, they have moved 4 times in 15 years and have owned a house for that whole time. Their last assignment was in a tough real estate market so for the first time they rented and it worked out fine but they still own their house from their last post (rented it to a friend).
The long term equity is just another "retirement bucket" for the future.....rent simply doesn't offer that option!
You are ASSUMING that rent = mortgage PITI plus maintenance, and also ASSUMING that a person does not buy more than they would rent. I rent a room, what do you suggest, should we change the laws so that it is possible to buy a room?
Job transfers happen, but plenty of people move frequently even owning houses. My sister is married to a career military guy, they have moved 4 times in 15 years and have owned a house for that whole time. Their last assignment was in a tough real estate market so for the first time they rented and it worked out fine but they still own their house from their last post (rented it to a friend).
The long term equity is just another "retirement bucket" for the future.....rent simply doesn't offer that option!
I worked as a financial planner at a big firm after college. One of their "sales strategies" was to pitch term life insurance and invest the rest! Then the issue became, people wouldn't do it! The extra cash would simply get spent. So they decided to sell a variable life insurance product (more money than term, bigger commission and it had an investment angle). Since it was wrapped up with the "needed life insurance" then it wouldn't have a huge default curve.
The rent and invest argument only works if the "extra money saved" gets invested in something with good returns. Too many people rent and spend.
I have a family member who makes a very strong income (150-175K yr depending on bonuses). She has a rental mentality (car is leased, condo is leased) and doesn't save a nickel. She has owned property in the past, had made some profits but doesn't have any serious downpayment money and doesn't want to downgrade her standard of living. She had hoped to remarry and would buy something at that point (hasn't happened, nothing on the horizon). As she gets older she feels more left behind on the buying a house idea. Her thought is her age + 30 yr mtg = dying before it is ever paid off!
Location: East of Seattle since 1992, 615' Elevation, Zone 8b - originally from SF Bay Area
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Quote:
Originally Posted by le roi
Boomers' home value gains were driven by falling interest rates and increased mortgage availability.
Since we're basically on the zero-bound right now, in order to think that millenials will see the same gains boomers did, you'd have to assume that interest rates would be about negative 15% in 20 - 40 years.
I don't know about that. It depends on where they buy, and the demand there. Our value went from 190k to 674k from 1993 until the recession, when it dropped to under $500k. Since 2011 with stricter mortgage qualification, it's gone above that 2007 peak, to $818k. It's averaging 10-13% increase per year. Several of my employees are millennials, and have managed to buy in the Seattle area. Two condos, one a 4 unit apartment building, just a year after getting his MBA. Working while going to school reduces or even eliminates student loan debt and results in experience when applying for a job.
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