Different kinds of change happen with each generation. Younger people want different music and lifestyles, using new developments in technology to transform their lives.
This means that previous generations will have major differences to compare with young people, especially when it comes to housing. Baby boomers had the classic American dream to chase in which they got married, bought a house and raised kids. Millennials look forward to a slightly different future.
A big disrupter to the American dream is the fact that millennials are renting more than any generation before them. It’s lead people to wonder why that is and what factors play into the decision to rent.
Read on to learn about some of the biggest reasons why millennials are renting more and why it works for them.
They Make Less Money
Millennials are no strangers to living on a starting wage when they get their first jobs. Many began to work after the last time the federal minimum wage was increased to $7.25 in the summer of 2009.
While they’ve had success in working for the highest minimum wage yet, the millennial generation overall makes less money than baby boomers did at the same stage. Studies show that millennials make 20 percent less with their median household incomes.
And the minimum wage? It’s still $7.25, but the value has fallen by over a dollar because of inflation. Minimum wage is actually worth $6.19 today.
Lower wages make it more difficult to save for a home, leaving millennials to rent apartments or townhomes.
They’re Postponing Marriage and Kids
Another facet of the American dream for baby boomers was to get married after graduating college. Millennials have a different picture for their post-college lives. They’re postponing getting married, opting not to bother with expensive ceremonies or legally binding commitments.
This also pushes off the idea of kids for most millennials. The US birth rate is at an all-time low, with millennial women waiting until after 35 to start having kids. The reason? They recognize that it’s costly to raise kids, so they’re willing to wait until they’re further in their careers before having babies.
Without needing more space for kids, the idea of buying a home seems less appealing when they could rent a smaller space that’s more affordable.
They Face Higher Mortgage Qualifications
Before the Great Recession of 2008, a housing bubble had been building. It exploded after the recession hit, intensifying foreclosure numbers and increasing mortgage qualifications.
Millennials now face these qualifications to be able to buy a home, along with carrying their student loan debt in a job market that pays them less than ever before. It makes it risky for banks to give out mortgages, decreasing the number of millennials with access to homeownership.
Even with these challenges, 92 percent of millennials who don’t currently own a home say they’ll buy one in the next four years.
They Enjoy the Freedom
Millennials have big dreams to see the world and be able to travel, and it shows in how often they move. Millennials only made up about 24 percent of the US population in 2012, but they accounted for 43 percent of all movers.
Buying a house is a very permanent decision to make, especially compared to signing a 12- or 13-month lease. Enjoying the freedom to move at the end of a lease is part of what keeps millennials from signing up for homeownership.
They Don’t Have to Handle Repairs
Another big bonus of renting is that millennials don’t have to worry about paying for repairs and maintenance. Rental properties most often have a work crew that’s ready to do things like unclog toilets, replace broken fixtures and spray for bugs monthly.
On the other hand, homeowners are advised to save one percent of their home’s value for maintenance. If a home is worth $300,000, that means the owners should keep $3,000 for emergency repairs.
That’s a lot of money for young people living paycheck to paycheck. It makes more sense for them to save that money to put toward groceries or student loans and let the rental property’s maintenance crew take care of any repairs.
Their Dreams are Different
Baby boomers dreamt of the white picket fence home with the three kids and a dog, but millennials have a different dream. They know they have to work harder to save their money, so when they do build up their savings, they want to experience life outside of work.
Millennials still want to own homes, just further down the line than baby boomers bought them. As long as their economic and social situations stay the same, millennials will keep happily renting as long as they need to.