Purchasing a home is part of achieving the American dream. Not only does a house provide a comfortable place to return at the end of a hard day’s work, but it is also an essential component of retirement planning. Still, millennials are not purchasing homes at the same rate their parents and grandparents did.
Why are younger Americans opting to rent instead of buy? According to experts, the answer is not as clear-cut as you may think. Here are a few reasons:
Home values have skyrocketed in recent years. In fact, according to Zillow, the median home price in the United States is $231,000. This number represents a nearly 5% increase in the last year alone. Because the average millennial earns just $35,592 per year, buying a home is simply out of financial reach for many of them.
Outstanding student debt in the United States is quickly approaching $1.6 trillion. Because many millennials take loans to pay for college tuition and other educational expenses, their income-to-debt ratio may be too high to qualify for a conventional mortgage.
Gone are the days when individuals chose to live within just a few miles of where they grew up. Nowadays, many millennials want to explore the world before finding a place to call home. This sense of wanderlust may encourage them to delay purchasing real estate for a few years or longer.
Many millennials have elected not to marry or settle down with a partner. Naturally, purchasing a home is often more feasible for couples who have two incomes than it is for single individuals. While millennials may eventually choose to walk down the aisle and subsequently purchase property, their relationship statuses currently take a toll on homeownership.
Whether you are a millennial or someone considering selling a house, you should understand the potential toll this phenomenon may eventually take on the housing market.