Becoming a homeowner as a millennial is not easy. Have you ever wondered why? Check out these 5 reasons.
1. Rent is Increasing Faster Than Salaries
Inflation is natural. However, inflation in the past few decades has disproportionately affected the cost of living while the average salary has stayed somewhat constant. Life is more expensive for millennials – but they’re barely getting paid enough to afford it.
This makes it nearly impossible to save up for a downpayment – just check out this graph from Hot Pads. With a high savings rate, it takes years just to save for a minimal down payment – over a decade in some parts of the country.
2. Homes in Large Cities are Unaffordable
Many young people find work in urban environments – but it’s next to impossible to find affordable housing there. Renting is expensive enough…the cost of becoming a homeowner in a large city is staggering. Many choose to rent so they can stay close to their coworkers and jobs, rather than buy a home outside the city.
3. Young People are Forced to Get a Bad Loan
Lending options are limited for millennials, many of whom have a mediocre credit score or a limited credit history. This leaves young people settling for high interest loans such as the FHA or USDA mortgage loan – which means spending thousands of extra dollars in interest and fees alone. Check out our article here to compare the most popular loans available today.
4. Borrowing Money Becomes the Last Resort
Some young adults will find themselves at the end of their rope, leaning on their last resort: borrowing money from friends or family. This never ends well, and can cause tension in any relationship.
5. Too Much Money Goes to Health Care
Millennials have extremely high health care prices. Insurance premiums have continued to surge, while fewer employers are covering comprehensive health care. Many young people have the equivalent of another car payment just in monthly premiums – not including the actual cost of seeing a doctor. This leaves little room for saving up for that down payment.
6. Student Loan Debt
Most young people who went to college have thousands of dollars in debt. It’s impossible to save for a home while giving every spare penny to pay off that college education (which is much more expensive now than it was for boomers).
Is there any good news here!? Fortunately, there is. Despite all the challenges, around one third of millennials own a home. Many took advantage of low interest rates during the pandemic and bought a home then. We are hopeful that the new political climate may make things easier for millennials looking to buy!
If you are looking to buy a home and feel like you’ve lost all hope – check out our interest free down payment investment at www.home.llc.