Rent or Own a Home? What Young Adults and Millennials Are Doing

Young adult couple buying home

Homeownership, the American dream of previous generations, is not as important to young adults and Millennials as it was to Baby Boomers - at least, not at as young an age. In 1982, the average age for a first-time home buyer was 28.2 years old. In 2015, the average age was 33. Not only are Millennials older when they buy their first home, but they are more likely to be single than their Boomer parents were - only 40% of first time Millennial homeowners are married, vs. 52% of Boomers.

 

Lifestyle Choices

With Millennials marrying later than their Boomer counterparts did (27 for women, 29 for men), the urge to settle down is not as compelling as it was for their parents' generation. In addition, the large number of Millennials living at home (53% of those under the age of 25), whether by necessity or by choice, is slowing their inclination to become homeowners.

While many Millennials do want to move to the suburbs when they start having families, many are putting down roots and revitalizing urban areas that have been undervalued and neglected in the recent past, creating a sense of community for themselves and their neighbors. More likely than not, they will continue to rent in these locations.

Student Debt and Mortgages

Another big factor in putting off purchasing a home is student loan debt. Again, this is very different from the Boomer generation experience. 

According to (a) survey, 62 percent of respondents said their student debt posed a hardship on their personal budget when combined with all other household spending. Specifically, 35 percent said they found it difficult to buy daily necessities because of their student loans; 52 percent said their debt affected their ability to make larger purchases such as a car; and 55 percent indicated that student loan debt affected their decision or ability to purchase a home. - USNews.com

The average college loan debt in 1971 was $2700, vs $35,000 in 2015. Adjusted for inflation, this is still double the amount of debt owed by the average student. Paying off student loans takes precedence over home buying for Millennials.

The price of homes is a factor for Millennials living in the high cost-of-living but desirable coastal cities such as Los Angeles, San Francisco, Seattle, New York City, Washington DC and Boston.

Home prices in these cities are notoriously high, keeping more and more Millennials at the renter stage of life. While many are comfortable with long-term renting, financially it isn't necessarily the best choice - however, coming up with a down payment, covering property taxes, expenses, repairs and more are all deterrents for Millennials when considering purchasing a home. If homeownership is a primary goal, living in the midwest will offer the most opportunities at attainable prices. For example, the average home price in Kansas City is $111,300, vs San Francisco, where the average home price is $1,112,000. 

Perhaps Homeownership is Overrated

Some believe that homeownership is not necessarily the best choice for Millennials. With average career changes every three years and the ability to work remotely, living in one place for a long period of time is not nearly as common as it was for Boomers. Millennials see this peripatetic lifestyle not only as normal but also desirable.

Ninety-one percent of Millennials (born between 1977-1997) expect to stay in a job for less than three years, according to the Future Workplace Multiple Generations @ Work” survey of 1,189 employees and 150 managers. That means they would have 15 – 20 jobs over the course of their working lives. - Forbes.com

Boomer parents of Millennials need to understand that their young adults may have different goals and ideas about how to live than they did. Homeownership is just one of many options Millennials consider when planning for their lives. While renting may not always seem like the most economically prudent choice, it allows for Millennials to move, adapt, change and shift as they want and need to based on their careers and relationships. While homeownership may be a goal, it's not necessarily an immediate one.