The biggest barrier for would-be first-time homeowners is financing the purchase, and for millennial Americans that barrier is even greater. Student loan debt is now the second highest consumer debt category – behind mortgage debt and higher than credit cards.
2016 college graduates were the most indebted class year – graduating with $37,173 of student loan debt per student on average. The average 20-something makes a $350 loan payment each month.
Real estate site Trulia commissions an annual survey about Americans’ housing sentiments. Among respondents ages 18-34 who wish to buy, the biggest obstacles keeping them from buying a home are saving up for a down payment (66 percent) and rising home prices (47 percent). The polling also found that of millennials who plan to buy a home one day, the majority (65 percent) plan to wait until after 2020.
American renters overall see affordability as a major obstacle to becoming a homeowner. According to Freddie Mac Multifamily Renter Research conducted by Harris Poll in 2017, 7 out of 10 renters – across all generations – believe renting is more affordable than owning a home. And while financial reasons are a big reason people rent instead of own, one-third of the Freddie Mac poll respondents reported “buying a home is just not a priority for me right now.”
One other intriguing factor contributing to a greater acceptance of renting a home rather than buying is a societal and psychological shift. Today, a growing number of people use mobile applications such as Uber and Lyft to ride-share (sometimes in lieu of owning a car), subscribe to music and video platforms through Amazon, Apple and Netflix (rather than owning physical copies), borrow work or formal clothing via Rent the Runway, book vacation homes on AirBNB, and even lease their mobile phones as part of their cellular service plans.
It may be a stretch to compare lower-value possessions like those examples to investing in a home. However, it’s clear that especially among the tech-native Millennial generation, flexibility and mobility are an inextricable part of their lifestyles – and a 30-year mortgage commitment offers neither.