Millennials and Real Estate: 3 Reasons to Consider Homeownership
Millennials are influencers. While the youngest of this generation recently graduated high school, there is also a large segment who have children and have been in the job market for 10+ years. Despite the wide age range, this group’s choices have far-reaching and long-lasting impacts. They’re creating new markets… and disrupting others, including the real estate industry.
It also turns out that millennials are investors. A new study from Merrill Edge shows that this group is saving and concerned about the future. They’re also concerned about the “now.” They are not waiting to traditional retirement-age to enjoy the results of their workplace efforts.
While these patterns may look different than generations past, it’s important to understand that millennials grew up during the recession. And the housing bubble, in particular, has left a lasting impression. Many have opted to rent.
But as 2017 rental prices begin to reach mortgage levels, it may be time for millennials to look at real estate through a new lens: as part of their investment portfolio. When it comes to millennials and real estate, here are three reasons why this audience should consider homeownership.
Homeownership can help earn financial freedom.
Financial freedom is the goal for millennials. In lieu of saving “to leave the workforce” like 55 percent of Gen X and baby boomer counterparts, 63 percent of millennials aim to reach a level of savings or income that will allow them to live a desirable lifestyle long term.
And owning a home can certainly be a part of a strong investment portfolio and a step toward that goal. It is an asset protected from inflation — and a physical asset at that, meaning it won’t disappear into thin air (like stocks sometimes do). However, like a stock, homes do have the possibility of appreciating over time. And while interest rates have gone up slightly this year, they are still at historically low levels. In addition to getting a great deal, paying more off the principal and less interest means homeowners are more likely to pay off a mortgage at the end of the term. And being mortgage- and- rent-free? Well, that’s a true hallmark of financial freedom. What’s more, there are also tax breaks, giving homeowners more liquid assets to work with throughout the life of a home loan. It’s an opportunity to invest back into the property, fund retirement accounts or even travel.
Homeownership means equity and investing in oneself.
One of the most interesting stats in the recent study? Millennials are saving 36 percent more than prior generations on an annual basis. There’s even more than one-third who save 20 percent of their salary. They clearly value investing in themselves.
There’s a gap, however, when it comes to investing in real estate. First-time homeowners only make up 32 percent of buyers, the lowest percentage since the 1980s. Historically, this number has sat at 40 percent. What’s more, many millennials are opting to rent for six years before considering homeownership, and others have returned home. From 2006 to 2013, living with parents has increased almost 15 percent.
This could be the year of change for millennials. As rent is expected to continue an upward climb in 2017, it may be the right time for this audience to take a stronger foothold in the real estate market. To start paying themselves each month and start gaining equity. There are already signs of a new trend. In the first quarter, new-owner households were double that of new-renter households.
Homeownership does not have to limit travel opportunities.
For some millennials, the opportunity to own a home may be competing with the opportunity to travel. Millennials place great value on experiences: 81 percent are more likely to spend money on traveling than generations before. And buying a home is often correlated with “settling down,” which is the opposite of this group’s life plans.
It’s true that the best real estate investments are ones where buyers intend on owning the home for years to come. That said, owning and living in are two different things. Homeownership doesn’t have to tether someone to a property. It can even offer money-making opportunities. From Airbnb to Craigslist, there are a number of digital apps and avenues to make some extra money off of a property when out of town. Homeowners can even work with a trusted real estate agent to manage a property if gone for many months.
Homeownership can help any generation invest in themselves – for the future and for the now. It’s always worth discussing current opportunities with an experienced real estate expert to learn how you can reach your unique property and investment goals.