Boomers are blaming millennials for opting for rental options to enjoy expensive apartments in urban and metropolitan areas instead of buying homes. The reality is far from that. Considering the current economy, it is difficult to buy a house for millennials. After all, who doesn’t want to own their home? For decades, owning one’s own house has been a part of the American Dream. Usually, demand rises in the housing market when house prices and interest rates fall.
However, there is one cohort that isn’t necessarily setting its eyes on homeownership right now. In fact, more Millennials are delaying their first house purchase. There are a number of reasons that accumulate to that decision. Rising prices, inflation, and stagnant salaries are, to name a few.
1- Affordability Makes It Difficult To Buy A House
Asset values are rising. In comparison to the times of the boomers, we have seen how inflation has played its part in the rising prices of almost everything. It is driving up the cost of timber, labour, and a variety of other building goods, making it difficult to buy a house. Thus, most individuals these days cannot afford to build or renovate a home.
Secondly, mortgage payments should generally not exceed 25% of a homeowner’s gross monthly income. Anything higher means they can’t afford the house. As the affordability gap between property values and income levels increases, it makes it difficult to buy a house for millennials.
i- Home Loans Also Make It Difficult To Buy A Home
Obtaining a house loan is a difficult task. To begin, you must have a good and established credit score. A conventional house loan, commonly known as a mortgage, requires home buyers to have a credit score of 620 to 740. Different factors determine your credit score. Factors like the debt-to-income ratio, how long you’ve had that debt, and how strong your payment history are all aspects that go into determining your credit.
A down payment on a home is also required. A 10% down payment on a $450,000 property is $45,000. Most millennials don’t have this much money with the high rents and other bills they are paying monthly.
2- Millennials Are More Prone Towards Debt Aversion
In contrast to previous generations, millennials refrain from taking out big debts. They fear getting trapped in the cycle of making big debt payments for years. Millennials also prefer saving up for bigger payments, such as down payments, to avoid taking out bigger loans.
Big expenditures like buying a house were once seen to be examples of “positive debt,” the concept that taking on debt in the near term might help individuals establish credit and wealth in the long run. Boomers took the adage “you have to spend money to create money” to its logical conclusion. However, millennials do not appear to believe this logic.
3- Living From Paycheck To Paycheck
Even though real wages are rising, they are not keeping pace with the rising cost of living, which is climbing at its highest rate in over four decades, according to CNN. Sixty-four per cent of Americans were living paycheck to paycheck at the start of 2022. After the pandemic, recovery in the United States has taken a more K-shaped structure. The upper-middle-class and high-income earners are doing better, while the lower-middle-class and poorest Americans continue to suffer. This trend can also be observed in the real estate industry. Households in the United States are renting more than ever before as inflation continues to wreak havoc on Americans.
4- The Real Estate Market Is A Seller’s Market
For the last few years, the real estate market has stayed in favour of sellers. The rising prices, high demand, and shortage of supply are all the reasons proving that the market is in favour of sellers. There are more persons looking to buy properties than there are available homes in a seller’s market. As a result, the seller obtains an edge.
Hence, affording houses in the majority of US cities is not a viable option for millennials as house prices keep skyrocketing, making it difficult to buy a house.
Regentology Can Help You Buy A House No Matter What Generation You Belong From
Whether you are a boomer or a millennial, it is not difficult to buy a house with Regentology. We have a team of experts who work around the clock to cater to all your real estate needs. Want to buy homes at affordable prices? Looking for suitable home loan plans? Finding the right type of insurance plan? Simply contact Regentology to get connected with the best real estate agents in your area.