Will Millenials start buying homes?

14 Replies

An interesting article:

http://www.housingviews.com/2015/04/30/will-millen...

The basic answer?  Maybe.

Is that unhelpful? LOL

What the linked article demonstrates is that Millenials WANT to buy homes.  Some of the, "Young people today don't want all that space, want the flexibility to rent, want to live in the city center and walk everywhere" stuff that you see is STILL not really true.  Most of the surveys that say otherwise are quicky reader surveys of a few hundred magazine or website subscribes.  The broader, more scientific studies have always shown that the actual preferences of Millenials as a group mirror those of previous generations.

Most common reasons for renting rather than owning?  Lack of a down payment (45%) and inability to qualify for a mortgage (29%).  

That's the good news.  Millenials would like to buy homes, and will when they can.

The bad news:  That may be a while.

The impact of the recession on their savings rates and credit, plus the massive student loan crisis, may mean that this generation will never fully catch up.

Plus, so many Millenials saw their parents get burned, even those who didn't buy at the peak, some of them are turned off and don't see buying a home as a good investment. This means more renters for us! 

I think it has more to do with the fact that people are settling down later. Our single friends are much more unlikely to own a house than our married ones. 

Settling down slower and or student loan debt are the two factors I see. 

I was 30 when I bought my house, and none of my friends had at that time. Granted I'm in California but unless you had family assistance or are a firefighter it doesn't seem like anyone at 30 is buying where I live. 

I think Elizabeth is right on target.  They will eventually start buying it will just be a later age bracket.  Everything seems to be getting pushed forward these days.  People are getting married later, people are having babies later, people are buying houses later.  Eventually they will settle down.

I am part of this generation and what I see from my peers is this. Lack of down payment, but usually plenty of income. A desire to own, but insecurity about the market. Lastly is relationship. At 27 the first of my single friends just made their first home purchase. 

Originally posted by @Eric Black :

Plus, so many Millenials saw their parents get burned, even those who didn't buy at the peak, some of them are turned off and don't see buying a home as a good investment. This means more renters for us! 

I think this plays a big role in many millenials' thought process. Many families were burnt by the crash and had to downsize. This has not been forgotten and causes reluctance for many to take the plunge into home ownership.

I'm part of this generation, but I fall into a small percentage of the generation that wants to invest in real estate.

I think that all things being equal, it's my belief that many in my generation would rather not own homes for the time being.  I will say that as a tenant, it was nice to not have to worry about anything, to have the flexibility to up and move to another city when the lease expires, and to have the ability to remain mobile.

I don't think it's a stretch to argue that Millennials are less interested in owning property than previous generations.  I think that for many of us, property represents a physical constraint that imposes on our freedom to move from city to city or country to country in many cases.

On the other hand, the financials of home ownership are so clearly stacked in favor of owning vs renting, that Millennials want to own for THAT reason.  The number one financial thing that my friends and peers complain about is that it sucks to pay rent.  It really does.  That's why I began house-hacking as soon as I was able.  I think that's why most of my peers will eventually end up owning homes as well. 

I think that it's going to be very difficult to quantitatively demonstrate or back up my claim that Millennials (at least that I know) are less inclined to want to own property than our parents when the financial benefits of owning vs renting are so significant.  I don't care what my preference is, a difference of $100K or more over a decade is a pretty powerful reason to buy property.

Originally posted by @Scott Trench :

On the other hand, the financials of home ownership are so clearly stacked in favor of owning vs renting, that Millennials want to own for THAT reason.  The number one financial thing that my friends and peers complain about is that it sucks to pay rent.  It really does.  

 What renters don't figure out until they become homeowners, or begin talking to lenders, is that a very large portion of a house payment goes to interest, taxes & insurance; none of which I paid for when I rented. Either way you're feeding "The Man." To me, home ownership is more about stability and freedom to do as I please in the home (but mostly keeping the wife happy.) 

@Eric Christians

That's very true. But if you are paying rent of $1,500 per month, and then you switch over to a PITI of $1,500 per month, perhaps 70% of your payment goes to interest, taxes, and insurance. 30% might go towards principle. In my limited experience, I find it to be rare that people go from one rent level to a much higher mortgage payment. Most kind of just get the coolest apartment or biggest, nicest house in the best area that they can afford, which is pretty similar in amount.

Anyways, if 30% of that $1,500 per month starts going to equity in the property, that's $450 per month.  Of course, they are still paying "the man" the remaining $1,050, but it's the difference between a -100% return on their rent, and a -70% return on a housing payment.

That's a massive financial difference, though still a loss.  Most can't quantify the expense in the way that I describe here, but it becomes very obvious over time.  It's a massive reduction in lost wealth.

The timeline is longer due to the recession, student loans and a few other reasons but almost everybody goes through the same life phases. The "live in the city, walk to bars/restaurants, etc" stage in your life is a stage. They will all grow up, have families, move to the burbs, buy SUV's and mini vans and eat at red robin. When you are married with kids your priorities change and you make compromises no matter how cool and edgy you thought you were at 25. At a certain point the cost of private schools and constant rent increases and moving is weighed against the appeal of owning a home in a safe suburb with good public schools. The wacky homeless folks that hang around your block are interesting or colorful when you are a carefree 23 year old... You view them differently when you are 33 and you are trying to get two kids in the house with an armful of groceries. I tried to hold out as long as I could but when my oldest was heading into kindergarten and staying in the city stopped making sense in every way.
I'm a millennial and I have 6. I'm trying to get my fellow millennials to follow suit. My encouragement: charge them as much rent as i can.

This is an interesting topic. 

I think Millenials are definitely starting slower than Baby Boomers but eventually mortality will catch up and stability will be within scope. Speaking from first hand experience since Im a millenial myself.

Do you mean a home to live in or just homes in general? I’ve got several rentals and plan to keep buying more.

As a millennial, I don’t plan on buying a home to live in anytime soon. I like the added mobility of renting and I don’t have to deal with maintanence issues.

Renting vs buying where I live, renting is cheaper. I live in an apartment that’s below the average for the area and I don’t need the ext a space of a home right now. All reasons I’ll be delaying buying a home.

I also like the idea of just skipping the starter home and buying a larger home when I need the extra space.

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