3 Debunked Myths About Millennial Renters
Millennials are often associated with negative connotations such as lazy, entitled, and financially risky. This is due in large part because millennials are the younger generation out of the four defined as millennials, Generation X, Baby Boomers, and the Silent. Because of this many believe that people that fall within this age bracket (born between 1981 and 1996) might not be as financially prepared as previous generations. But is that really true? Here are a few common myths about millennial renters and the truth about the matter.
Myth: Millenials Don’t Want to Buy a House False
Contrary to popular belief, the majority of millennials do actually aspire to buy a home. With the constant pressures that millennials feel from parents, peers, and even social media, millennials do aspire to eventually own their home home. The limitation is their financial ability and timing to purchase a home. Millennials are between 36 and 21 years of age. The average age of a first time home buyer in today’s real estate market is 32 years old (according to National Association of Realtors). This means around 73 percent of millennials are not at the average age to purchase their first home.
That said, this does not mean they have no interest in purchasing a home in the future. While millennials enjoy the convenience and freedom of renting, housing purchase demand will consistently increase due to millennials deciding to marry and have kids.
Myth: In Order to Buy a Home Millennials Need to Earn at Last $100,000 a Year
False
The myth of needing a six-figure salary to buy a home is completely false. In fact the average income for first-time home buyers in the United States is $72,000 for a $182,500 home at a 6 percent down payment. What does that mean exactly? It means that the average first-time home buyer needs to have $10,950 saved up for their down payment, which is 6 percent of the median home price of $182,500.
Two main issues surface with these data points. First-time home buyers might have difficulty saving up $10,950 for a down payment when they have other bills to pay such as rent and student loans. When this happens, yes, it can delay their purchase date further out into the future. First-time home buyers might also have difficulty paying their monthly mortgage after they purchased their home due to other personal loans. Because of this it is important that a budget is in place and the homeowner does not have too much debt that they cannot handle an additional payment. However, hope should not be lost, by having a consistent savings schedule can prove to be the key to purchasing a home.
Myth 3: Renting Hurts Your Financial Future
False
Perhaps the king of all renter myths are that renting is a worse decision than buying a home. The assumption is that when you rent, your money is essentially wasted by paying off your landlord’s mortgage. While this is not entirely false it does leave out a few other important factors. The fact is that deciding to rent or buy is a personal decision that involves your financial situation and future plans.
Renters enjoy the convenience of renting because of the flexibility to move and low accumulation of debt. Homeowners choose to purchase a home because of their interest in ownership of a large asset and stability.
For Millennial renters who tend to bounce from city to city, renting in their early years might seem like an ideal option. Millennials who choose to rent traditionally have the ability to live in higher cost area, are free of maintenance, and can live month to month, however do lose out on tax benefits and the opportunity to build equity. In the long run it really depends on the person and their long term goals and aspirations.