Millennials are moving back home and staying there longer. Relying on parents is more practical for today’s young adults because we stay in school longer and don’t have dependents of our own yet. Millennials make less and have different goals. This lifestyle is the result of the millennial goal of self-fulfillment.
Rather than prioritizing stability or starting a family, millennials first desire to establish careers that make them happy. That’s not to say that millennials aren’t making money or starting families, we’re just doing it later than previous generations.
Many millennials still live with their parents after graduating from high school because they decided to commute to college. College attendance is up, and millennials are staying home for longer. This shift is occurring because we are a generation in search of self-fulfillment. We seek purpose over a paycheck. A recent survey indicates that millennials would rather make $40,000 annually at a job we love than $100,000 at a job we find boring.
Given that we are willing to accept less pay, it is not surprising that millennials make less than previous generations. Trends such as a decline in economic mobility may be to blame. To accommodate for lower salaries, millennials are living with parents or renting more than their predecessors.
Millennials can’t afford to be homeowners if we are prioritizing paying off student loan debt. The standard federal repayment plan for federal student loans puts students on a 10-year repayment plan, but studies show that it takes the average graduate 21 years to pay off student loans. The goal of repaying student loans has become unreasonable for many.
Under federal income-based repayment programs, student loan debt is forgiven after 20 years. The purpose of income-based repayment programs is to prevent unreasonable financial burdens by capping monthly payments and then lifetime payments at 20 years. Income caps force the federal government to forgive more and more debt because by placing an income cap, the massive amounts just can’t be repaid in 20 years.
Given that most students expect to pay off their loans in their 40s, it seems only reasonable that millennials aren’t buying houses. Millennials are aged 20-39 right now, so they haven’t even started thinking about buying a home.
Even when we do start thinking about what to invest in when we finish paying off our loans, houses may not be first on the list. We are unsure if buying houses is even a good idea.
It’s no secret that the housing market has changed since the foreclosure epidemic of 2008. The 2008 recession understandably left many millennials associating buying a home with turmoil and financial instability.
The Bank of America says,
“Remember that the bulk of the current 25 to 34-year-old cohort started their careers during the financial crisis and early stages of the recovery when the economy and labor market were fragile.”
It’s hard to know what a good investment is when it comes to housing since the value of a home can fluctuate so quickly. Homeownership isn’t essential to the needs of today’s young adults given that today’s young adults are postponing life events such as getting married or having kids. Renting is more suitable to the needs of millennials because it’s less committal. It also gives us more mobility and career flexibility.
Renters often have lower utility bills and access to amenities. Renting also entails less financial risk in comparison to homeownership because renters aren’t responsible for unexpected maintenance and repair costs and aren’t directly impacted by declines in property value. Right now, the advantages of renting living spaces far outweigh those of buying for millennials.
Data collected by Pew Research Center reflects a growth in households renting a home versus buying, but 72% of renters said they want to buy a home one day and 65% say they rent because of their circumstances rather than by choice.
Renting is suitable for independent adults because it allows them to save money so they can focus on more pressing financial goals, such as paying off student debt. Millennials also put other financially straining life events on the back burner like having children. Without dependents, there are also only a few advantages to purchasing a home.
Having children is expensive, and many young adults say that they want to pay off their loans and become financially stable before starting a family. Another option is to reduce monthly payments to help keep up with the costs of having a child.
Richard Fry, senior economist at Pew Research Center, explains that
“They’re concentrating more on school, careers and work and (are) less focused on forming new families, spouses or partners and children.”
We put off settling down for lots of reasons. We live with our parents for longer and have more student debt to tackle. We postpone other expensive life events such as starting a family or getting married because we are focused on our career or want to first achieve financial stability. Overall, this lessens the advantages of purchasing a home.
Millennials aren’t buying houses. Not because we don’t know how to invest or because we are irresponsible with our money. We aren’t buying houses because it simply isn’t practical. We have different priorities because we face different obstacles and we have different needs.