The renters are taking over. Fifty-two of the largest 100 cities in the U.S. are now renter-majority cities, and it’s looking like the trend is going to continue. Does this mean the American Dream of owning a home is over? And what’s causing this to happen? We’ve got some answers.
There Are Times When It’s Smarter to Rent
We’ve all been taught that renting is basically just throwing money away, but there are times when it’s definitely the better option. Many careers involve being more mobile than ever versus the Baby Boomer generation that normally settled down with a single employer and pension. If yours is a job where you know you’ll be moving soon, it isn’t going to be worth it to buy.
Many people enjoy living in the middle of things and being able to easily commute to work with public transport. This isn’t always doable when buying a house. Many of the affordable houses are in more rural areas, and it’s harder to get to work. The cost of commuting can be a factor as well. Wear and tear on cars along with gas expenses and the time out of your day can really add up.
You also have to be totally ready for at least a 20% down payment and have a great credit score to get a decent deal on a home. Interest adds up and makes your mortgage a lot higher than expected. Also, if you have a great apartment in a location you love and you get a good deal on, why give that up until you’re absolutely sure you’re ready?
There Are Fewer Homes on the Market…
Trulia recently found that the number of homes on the market is at a low not seen since 2012. The number of homes for young couples just starting out keeps shrinking. However, the percentage of homes on the market that are considered premium homes is increasing. These aren’t really feasible for those young couples to afford.
…And People Can’t Afford the Ones That Are
Currently, the average start-up homebuyer would have to dedicate 38.3% of their monthly income to buy a home. This is a 2.9-point increase from 2016. Home affordability hit a huge low at the end of 2016.
Mortgage rates are getting higher while home prices are soaring, and income growth is still only moderate. Certain housing markets are surpassing their previous peaks from the last housing boom. Demand for homes is increasing, and builders are increasing production only minimally. There are a lot of factors coming together to raise those house prices.
The Dream Isn’t Dead — It Just Might Take Longer
Homes are still attainable — it just might take longer for millennials to obtain them. Overall, it’s taking millennials longer to fully reach adulthood than generations past. The economy is shifting, and it’s harder to get a stable, decent-paying job. Millennials’ parents could go right out of high school and get a good job in a factory, but that’s not as possible anymore.
With student loans and the longer amount of schooling to get an ideal long-term job, it’s understandable that millennials are holding off on buying homes. Many have to move back in with their parents after school until they find a job. Millennials are getting married later as well. Taking longer for things is common now — buying homes included.
The market doesn’t look to be changing any time soon, so we might as well accept that renting is becoming the new normal. While owning a home is still the dream for most, they might have to wait a bit longer to attain it. In the meantime, save up, do research and try to make the dream a reality!