Why Millennials Prefer to Rent Instead of Own
Last week, we talked about how the Millennial generation is facing some unique challenges in life, and how those challenges are shaping their overall financial picture. If you missed that video, you can watch it here.
One of the big things that Millennials are not doing, according to a recent report, is buying a home. And it’s not necessarily because they can’t afford to buy one (although that does factor in for some of them); instead, they’re just choosing to rent.
So what’s going on here? Are they just giving up on the American Dream of owning a home with a white picket fence, and two cats in the yard?
As mentioned, for some it’s the cost of the home itself – usually the down payment, since there are so few starter homes left anymore. But there are other reasons, too, many of which have to do with the hassles and hidden costs of homeownership.
And if you already own a home, you know what those costs and hassles are: you often need extra furniture, you may have neighborhood maintenance fees, property taxes and insurance, and there are always repairs to be done. And even though some of those costs are often included in the monthly rent, millennials like the idea that they don’t have to think about them.
Another big factor has to do with mobility and not being tied down for years to a mortgage. A renter can move in or out of a place regardless of whether or not the price of a home has gone up or down. An owner is generally unwilling to move if the value of their home is less than what they owe on it.
Not to mention that it’s not just the Millennials who are shying away from homeownership. Many in the Baby Boomer generation are also doing some downsizing and turning to renting. A report from CNBC says that a lot of empty-nesters have decided that they want to enjoy life without having to care for a large home, and without having to bother with the extra work and expenses.
So what does all this mean to you? As an investor, you might be thinking about ways to take advantage of these current trends among both Boomers and Millennials. We’ve talked in the past about how alternative investments may potentially give you some non-correlation to the stock market, and rental real estate, like large multi-family units, may be something you might want to consider, if you’re looking for elements of both potential growth and income. If you’d like more information on how it works, and how it may fit into your overall financial plan, just give us a call here at Lucia Capital Group – we’re here to help.
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