Millennials have shown a decided disinterest in buying a home. That’s not good news for realtors and home sellers, but it’s worse for the 20- and 30-somethings that continue to rent instead of buy.
What have they got to lose? About $700,000 over a lifetime. Right now 59% say they want to rent instead of buy, according to a survey of 1,300 done by Millennial Branding and Elite Daily. Right now one in four own a home. Three and four decades ago, that figure was one in three for that age group.
Those in the millennial demographic were born between 1982 and the early 2000s. That means the oldest in the group is 33. The main reason those in this group choose not to purchase is they can’t afford it.
Many researchers interpret that to mean they want to put their money into other ventures. They want to keep their options open as long as possible. For example, working while traveling around the world is mentioned as a dream lifestyle.
And a mortgage, even at a low rate, is still a heavy duty investment. Buying a home is a gain in many ways, but it does require focusing on certain life goals.
The other big reason is that they are marrying and having children at later ages. Marriage and family are one of the big triggers for buying a home.
What They Are Missing
According to a vice president of RealtyTrac, it is cheaper to buy than to rent, even after factoring in the cost of insurance and property tax. Mortgage rates are still low, a big incentive because it reduces the overall cost of the investment. And the cost of homes keep going up.
Buying is considered such an essential part of a person’s investment strategy because it lets them own an asset, one they use on a daily basis. The sooner you buy, the sooner it starts appreciating in value, adding to your long-term net worth.
By the Numbers
Here is a look at what it can cost a millennial to rent instead of buy.
If he rents a three-bedroom dwelling, he can expect to pay $1,312 each month. The average increase in rent is 2.7% annually. If he rents for 30 years, he will have paid $717,000.
If he buys a home for $190,000, the median cost in the U.S. today, paying 10% down, it will probably increase in value by 3% a year. That means in 30 years, with a fixed rate mortgage at 4%, he would have an asset worth $373,000. That includes mortgage payments, insurance and tax.
He would have paid a total of $373,00, which means he made $52,000 on the deal. Plus add in the rent he didn’t have to pay for those three decades, which is $717,000. His net profit on the house plus the rent he didn’t pay is about $770,000.
And after the house is paid off, he would live in it without having to pay mortgage payments. That’s the perfect financial setup for entering your retirement years.
Beside the money, other benefits accrue from home ownership. Here’s a look at a few:
- You get tax advantages by owning a home. The IRS lets you deduct mortgage interest.
- When you have a fixed rate mortgage, you know how much you’ll be paying each month. When you rent, you are at the mercy of your landlord.
- Your home is yours, a stabilizing element in your life and that of your family.
- You can decorate your home the way you want. You have a yard and can landscape it as you please.
- When you own a home, you acquire roots in the neighborhood. This leads to a greater sense of community and incentive to work for improvement, like better schools and less crime.
Though millennials may be putting off buying a home because they want to keep their options open longer, they are losing time and money in the process. Home prices keep rising. The time to buy is now.
The Cays Condo Community
With these facts in mind, it’s easy to understand why the time to buy a home is now. Luckily, buying a Condo is just as beneficial, as buying a home. The Cays is a real estate investment that will save you money compared to rent, and come with luxury amenities that one could only dream of owning with most homes. Contact the Cays to discover luxury living Home ownership.
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