5 Reasons You’re Still Renting
Financial, personal and professional factors may lead you to put off homeownership. Should you remain a renter indefinitely?
If you're not sure you plan to remain in your current city forever, renting makes it easier to pack up and relocate.(Getty Images)
Real estate has historically been one of the most stable and sound investments available, and for decades, homeownership has been a milestone on the path to adulthood and financial security. Because homeownership can help to anchor communities, the government encourages homeowners with tax deductions that aren’t extended to renters. Many Americans consider their home as their largest asset, and for decades, despite economic peaks and troughs, home values have overall increased.
However, this trend appears to be changing as millennials are becoming homeowners later in life than previous generations. According to a 2019 report by Apartment List published in November, 12.3% of milliennial renters plan to "always rent," an increase of nearly two percentage points from the prior year. For certain, the way in which millennials view homeownership and its associated roots has come to influence housing trends in an increasingly noteworthy manner.
Read:Buying a House in 2020: What to Know ]
Whether you are a millennial or not, here are reasons you might still be renting, even if you can afford to buy:
- The recent history of U.S. homeownership is discouraging.
- Increased mobility.
- Simplicity of living.
- Delay of personal-life milestones.
- Cash flow and other investments.
The Recent History of U.S. Homeownership Is Discouraging
Real estate has been a good investment over the last century, but the 2007-2009 economic crisis discouraged millennials. “Most millennials graduated just before or during the Great Recession, caused by … mortgage products going awry,” says Jodi Zamore, 37, who works in marketing in New York City. “Watching loved ones struggle with homeownership while dealing with the ripple effects in the economy, it’s not at all surprising that millennials and other renters have doubts (about buying).” She adds: “Nobody wants to get caught up in a broken system.”
As society becomes increasingly connected, it is easier than ever to move cities for a new job or relationship, and moving is far harder if you own versus rent. Eric Kerrick, 32, is an entrepreneur who lives in New York City, the fourth city he has called home in a decade, and he explains that “it can be easier to view your home as a hub to run your life out of, instead of as somewhere to settle down.”
The additional fact that millennials don’t stay in any job as long as previous generations has resulted in a greater sense of impermanence and a willingness to move to a new city for a promotion or new opportunity. And with living expenses higher than they’ve ever been, focusing on career progress is a higher priority for young people today, even if it takes you to another city.
“I haven’t honestly thought about buying a home because I’ve been focusing on my career,” says Samantha Wolinsky, 33, an entertainment publicist who just moved back to Los Angeles from New York. And for homeowners, moving for a job proves trickier: Nancy Schuler, 37, a human resources executive at an investment firm explains, “I would not have been able to move as easily for this opportunity in Austin had I not had great real estate agents and family to help me sell in NYC.”
Simplicity of Living
Possessions and a mortgage are an added weight to mobility. “Of course mobility is a big one for this younger generation, and it encourages them to live simply,” says Monica Fuentes, 43, an economist and portfolio manager in New York City. “Millennials have a different value system, much of it based on experiences over possessions. They love to travel, they practically invented fast fashion, and they don’t seem to aspire to drive around in a Ferrari like maybe my generation did.”
A lease as opposed to a mortgage may also encourage more minimalism in terms of personal belongings. “Rentals don’t feel that permanent. I haven’t amassed as much stuff as I might have if I owned a condo. I also aspire to a clutter-free life, and that usually means digitizing everything and purging every time I’ve moved," Wolinsky says.
Delay of Personal-Life Milestones
Many people delay buying a home until they are married or have a family, as they might feel more tied to a certain community. “People are putting down roots later in life,” Fuentes says.
“Buying a home made more sense once we were married,” Zamore says. She notes that her husband’s “added income and skillset as an architect meant that we could not only build a home together but buy a fixer-upper and hopefully make a good return, which made the whole investment seem more worth it versus keeping our money in the (stock) market.”
But for Evan Seigerman, 31, who works in financial services in New York City, there isn’t much of an incentive to buy, even now that he’s a newlywed. “The expense of maintaining our rental isn’t burdensome for us," he says. "Our rent is less than the carrying costs of a comparable owned apartment. Buying an apartment and then renovating are two major expenses that neither of us wants to deal with right now because they seem so expensive and exhausting.”
Cash Flow and Other Investments
It is no secret that purchasing and maintaining a home is more expensive than ever, particularly in big cities like New York and San Francisco, where even with low interest rates, $1 million doesn’t seem to go very far. Furthermore, student loans have become an increasing burden for younger generations, eating into their ability to save.
Danny Bartels, 23, a consultant in Chicago, would love to be a homeowner once he can afford it. He says he recently paid off his student loans with help from family, but rent is still his biggest expense by far. Garret McKay, 33, a Los Angeles-based screenwriter, says that “my student loans are all paid off and I am now saving, but during my 20s, a lot of my money went to paying off school debt. My parents were homeowners well before they were my age.”
The desire to own a home seems common among young renters, but it’s not as feasible for them as it was for older generations. Many of them feel ready to buy a house, but don’t have the resources yet. Bonnie Halbfinger, 30, who works for a nonprofit in New York City, says, “Once I have a more stable foundation, it’s definitely a priority for me to invest in (a home).” In the meantime though, she’d “rather rent in the city than buy outside of here,” she says.
Even after the down payment, carrying costs often aren’t low. Andrew Hirshberg, 32, an account manager for a luxury furniture company in New York City, explains that “my condo fees have gotten high, and it might now be cheaper for me to rent something similar – especially in the current market.”
In order to afford increasingly expensive basic costs, many younger people have one job to pay the bills, and another to fuel their passion or help save, often referred to as a “side hustle.”
“One of the things I love about millennials is that that they really aren’t just one thing. They have broad skill sets, they’re more open-minded than anyone who came before them and they’re really worldly," Fuentes says.
Real estate remains an attractive asset and younger generations will eventually seed roots, but it may take longer. And they will bring their values, possibly disrupting traditional homeownership, to create new norms and efficiencies, much like they have in so many other aspects of life.