Historically, there has been a structure to the steps in life. You get married, buy a house, and then have kids; that was what your grandparents did and what your parents did, and now what you were expected to do — it was as simple as that.
However, life just isn’t that simple anymore. Millennials (those born between 1981 and 1996) aren’t satisfied with such a cookie cutter definition of success and are shaking the system up: those crucial steps occur in any order they please, if they happen at all, but we’re going to take a look specifically at the shift in homeownership trends.
Financial Freedoms And Burdens
Harvard’s Joint Center for Housing Studies expects the number of renters to jump by 4 million within the next decade, and a lot of it (re: most of it) has to do with the financial responsibilities involved.
The divide between yearly income and average home cost is a mile wide; although it’s expected that your home will cost significantly more than you can earn (which is why mortgages are considered ‘good’ debt), if the difference grows too large, it can put people off of the entire experience. As of 2018, the median home was priced at $180,000 and the median annual income was less than half of that, at $72,000. When you take into account that nationwide student debt is at an all-time high (currently valued at $1.48 trillion) — adding significantly more financial stress onto those of homebuying age — it seems much more manageable (a.k.a. affordable) to rent; after all, the average down payment on a mortgage is over $12,000. When you factor in the extra costs involved in homeownership, renting becomes the most viable choice.
Owning a home has one big benefit: your monthly mortgage payments are building equity rather than going toward a landlord. This means that at some point far in the future, should you continue to be able to afford them, you won’t need to pay each month anymore — your home will be entirely your own. Unfortunately, there is a trade-off.
When you become your own landlord, you assume their responsibilities. Anything that breaks, goes wrong, or falls apart is now solely reliant on you for repair or replacement. Did you forget to swap out your HVAC air filter every three months and now your unit is busted because it’s had to work extra hard due to a clogged filter? That comes out of your own pocket. Did you neglect to opt for flood insurance and now owe $20,000 to have your basement cleaned out? Too bad, that’s your purview.
It’s been proven that — with homeowners insurance, maintenance and repairs, and property taxes, among a slew of other costs — the associated costs of homeownership might run as high as 50%+ of your mortgage payment; that’s a lot of money — money that you could be saving (or using to pay off your student loans) had you decided to rent. Rather than going broke repairing their burst sewer lines (around 80% of American homes rely on sewer systems for waste disposal, making it an extremely common risk), millennials are choosing rentals and letting the landlord handle the mess.