Millennials could roughly be described as people who during the present age are in their 20s or their early 30’s. Why their decision to invest in real estate is a debate is because these people are now finding themselves in the worst possible situation of real estate that has been seen as far back as their grandparents. These millennials now stand at a point where they lose regardless of whether they buy the house that they live in, or they rent. But why the debate then? Yes! There has definitely been debate regarding which choicely is better amongst the two dilemmas, but the debate doesn’t look to reduce the loss that the millennial take on when choosing between the two alternatives rather an aim is to investigate which of the two alternatives is less unbearable. Consequently, I believe that the millennials should buy rather than rent houses, and there are many reasons why I stand for this opinion, a few of which are discussed in the following few paragraphs.
There are a number of reasons why renting is the harder option at the present state of the real estate. The foremost problem is the ever increasing rents that become ever so hard to keep up with. As per a recent research, in the top five most affordable rental markets that the millennials have to choose from, the average rents take up 27percent of the average wages. And even in this choice, this age group of people has to give up on the choice to live in better neighborhoods with decent facilities. With this problem, areas like Brooklyn and Queens in the New York and the Virginia Beach city in Virginia become downright impossible to live in and their rents intolerable to keep up with.
But in the end, owning a house is still an option that is marginally better than renting. There are a number of reasons for this. This is because as hopeless as the situation of real estate may be in the present day; the mortgage is still becoming cheaper while the rents carry on their journey of the climb. Another reason is that buying a house would mean building property. The value of the real estate in the present age increases between 4 and 6 percent every year. And even considering that the value of property remains steady, the mortgage payments still mean that the wealth is being accumulated, something that couldn’t be said for renting. Also, with a fixed rate of the mortgage, the principal sum and the interest payable thereon remains steady so there is no increase in the amount that is to be paid in every installment. House once bought could also be then rented out and eventually turned into an investment so buying a house decision that cannot go wrong.
Apart from the above reasons, there are a few more that favor the millennials buy rather than rent. There was a time when the Federal Reserve had stopped buying Treasury bonds, and the end result increased in the interest rates. At present, however, the FED as eased up on the bond buying which makes it unlikely that there would be any future increase in the interest rates. Some experts go as far as predicting that the interest rates will fall; other say they will remain steady while those who predict rise also anticipate that the increase would be small. This is why the rates of mortgages are ideal at present for the buying of houses. Another reason is the tax benefits that come with property ownership. Homeowners have the benefit of being able to now deduct their mortgage interest as well as the property tax payments and also a few other expenses from their total federal income tax.
Despite the fact that buying a house is cheaper, there are still very few amongst the millennials that settle for the choice. This is because the financial situation plays a very major part in the decision between owning and renting. For starters, to get an ownership contract off the ground, there is a requirement for a pretty hefty sum in down payment, a sum that young men and women do not have lying around to clear this very steep target. What doesn’t help is the fact that even though the employment market may be gearing up in strength, the growth in wages for the millennials is still pretty slow. As of August 2015, the median price for buying a house stood at $292,000 and the same required saving up to $30,000 for the down payment. The priority of these young men and women, however, remains the intent to save enough for at least the rent of the coming 6 months just to keep up with the growing rentals.
There is now a benefit however that these millennials were not enjoying before, especially for the first time buyers, a benefit which favors that they buy. With a little bit of credit security, the Federal Housing Administration has now decided to back loans where the homeowners could put up a down payment as low as 3.5 percent.
These millennials are also seen being conscious when making the choice of the market where they want to buy or rent so renting in a decent neighborhood seems like the feasible option. So in many of the US cities, the houses that the millennials can afford to buy are not as appealing as the places that they can afford to rent. As in New York, the median price for renting a house is listed at $438,000. Buying a house may be 5 percent cheaper in New York, but the quality of the house that these millennials can buy for 438,000 is not the choice that they are prepared to settle with.
The millennials may be dreaming of buying houses sometime in the future, but very few are settling for the choice currently. There may be many factors which interfere with their decision, but the fact of the matter still remains; they keep looking for better than they can afford. How many of them will manage to find better is a question only time can answer. We can only wish them luck.
Works Cited
Lane, Ben. Here are the best and worst rental markets for Millennials. 28 December 2015. <http://www.housingwire.com/articles/35906-here-are-the-best-and-worst-rental-markets-for-millennials>.
Lerner, Michele. Renting vs. Buying a House – How to Make a Decision, Pros & Cons. n.d. 24 February 2016 <http://www.moneycrashers.com/rent-or-buy-a-house/>.
Mears, Teresa. 6 Factors Homebuyers Should Consider Over Interest Rates. 16 January 2015. <http://money.usnews.com/money/personal-finance/articles/2015/01/16/6-factors-homebuyers-should-consider-over-interest-rates>.
Tax Policy Centre. Home Ownership: What are the tax benefits? n.d. 24 February 2016 <http://www.taxpolicycenter.org/briefing-book/key-elements/homeownership/encourage.cfm>.
White, Gillain B. Millennials: Forever Renters? 23 October 2015. <http://www.theatlantic.com/business/archive/2015/10/millennials-forever-renters/412165/>.
