Everyone is talking about it, from business analysts, big news channels and the big business-related sites are talking about it too. Why aren’t millennials buying homes thought they seem to be earning a lot? With the affordability still within the historical average, it is hard to explain why millennials would rather buy iPads than invest in buying homes.
Well, we sought to find answers for our sake and others. Here are our findings and they have nothing to do with an exit interview form.
Student debt is so high it surpasses credit card debt and auto loans. For most millennials, student debt is a huge burden they have to live with. Trying to get into the home buying market where you’ll deal with monthly mortgage repayment becomes tough when you have a high student debt and possible penalties.
Noting that there is no guarantee of a high-paying job or any job for that matter after employment, home ownership for millennials becomes a strain.
Compared to the 60s, the current population is getting married or partnering up later in life, and this means that the trigger to buy a home early, a partner or kids, isn’t there. So, with millennials living independently or with their parents, they delay homeownership.
Banks and other lending institutions are looking for ways of reducing risks, and so, they are tightening the requirements for accessing credit. For you to buy a home, the banks expect you to put down at least 20 percent. A 20 percent down payment is high for a struggling millennial. With the rising cost of living and real estate, home ownership becomes a far-off dream for millennials.
What about the mortgage affordability programs? Well, while the programs offer home loans requiring a down payment less than 20 percent, they come with bottlenecks in the form of high-interest rates. Again, this is a move to reduce risks associated with defaulted payments. Top that with the fact that these programs require an applicant to take private mortgage insurance, another cost and you have a big deterrent to home ownership.
So, whichever way you look at it, home ownership is far from affordable for millennials.
Millennials are attracted to bright items, and sophisticated places and the big cities fall in the flashy lifestyle category. Most Americans aged between 25-34 years live in the big cities, and the numbers just keep rising. The move to the cities equals more renters and few homeowners. The big numbers increase the demand for rental space resulting in higher rental rates.
With big expenses on rental homes and the high cost of living, plus the need to own the latest items of luxury, it becomes increasingly impossible to buy a home.
Even though the cost of housing keeps rising, it is important to note that home ownership isn’t out of reach for millennials. Yes, there are financial constraints in the form of student loans and high down-payment costs but, a change in societal thinking would go a long way in making home ownership enticing, affordable and important.
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