All of us dream of having a home to come back to, a home where we can wind down after the bustling day we just went through. A home where we don’t have to worry about any monthly responsibilities. A house that we don’t have to live in constant fear of losing.
For many, though, that dream is still a dream. With the ongoing crisis in the economy, many can’t simply afford to rent a home. The younger generation is living with a portion of their income going to rent, struggling to make ends meet every month. Not to mention the debt most of these people are fueling their inability to buy houses for themselves.
The Unattainability of Home Ownership
For many Americans, affordable housing is simply nothing but a pipe dream, a necessity they cannot afford in this lifetime. Many turns to rent instead of having to worry about mortgage.
However, this isn’t a solution. The rates for apartments are on the rise and are predicted to keep on increasing. This problem is prevalent in major cities in the U.S. As of June 2019, the median price for an apartment with one bedroom is $1,216, with a 1.5% increase year to date.
A renter that works at least 40 hours a week while earning minimum wage will not be able to afford a typical two-bedroom flat. In a 2016 study conducted by Harvard researchers, 2/3 of people paying rent can’t provide buying a home of their own, with the rent pricing twice the rate of wage growth. The economy might be growing, but so is the inequality, with Americans continuing to rent as wages stagnate, and a house’s value keeps on increasing.
The Reason Why Newer Generations Aren’t Buying Homes
Here are some of the prevalent reasons why adults in this generation are less likely to buy a house:
Can’t Afford a House
In recent decades, America has witnessed the continued increase of a house’s price, especially in major cities such as Manhattan and California. The median home, as of 2019, had sold over for $325,000. In King County, the median cost of a house had risen to 4.4%, making homes have a value price of $589,950.
According to the National Association of Realtors or NAR, the home affordability index had dropped down in 2018, especially to new homebuyers. Not only that, debts left no option for these people except to rent, and will less likely buy a home of their own.
To many, the only way for them to get college education is to apply for student loans. Many had applied for the program despite the consequences it will entail after graduation. Because of student loans, many young people are putting off homeownership, opting instead to pay their debts first before settling down.
In 2019, other overall debt of newly graduated students had amounted to $1.5 trillion, which is a 6% increase from 2018, and a 33% surge from 2014, when it was still at $1.06 trillion. This amount was generated by 45 million Americans, who are still slowly chipping away at the excessive debt caused by education. Student debt had placed second in the consumer debt category, just below mortgage loans.
The younger generation prefers living in cities with bustling streets and a thriving economy. That is why many leave their rural hometowns in favor of seeking job opportunities on a broader hunting ground. It‘s no secret that the younger generation is not into pursuing careers revolving around agriculture.
Cities, especially major ones, have a crisis when it comes to the supply of houses. The sales of existing homes were predicted to fall by 1.8% during the end of 2019, with home prices annually increasing by 0.8%. The inventory of houses for sale has been decreasing steadily for several years, which makes prices drive up the wall and weakens the younger generation’s ability to buy homes.
Stricter Lending Requirements
To reduce the risk on their side of the bargain, banks had become more rigid and tight when it comes to lending to homebuyers. Many had doubled-down on the 20% down payment rule, causing the younger generation to save up more as house prices continue to increase. It will take longer for these people to generate the amount banks require, and with the continuous increase in costs, the cycle continues.
According to Forbes, the younger generations, especially millennials, are exemplary with saving and long-term financial stability. However, these aren’t enough and they should consider investing. Many experts recommend getting finance brokers or advisors to help them with these types of transactions, especially those who aren’t well-versed with the ins and outs of managing money.
Many factors contribute to the continuous decline of homeownership. From the supply of houses to the crippling debt that many faces due to taking up higher education. No matter how many try to save up, it won’t be enough to buy a new home. To many, resorting to paying rent is the only option they have. And even that is too much for what they earn.