Housing Changer: The Rent Trend
Tougher lending requirements, a transient lifestyle and seeing mortgages throw their parents’ finances in turmoil are causing more millennials to rent instead of buy a home. This attitude shift on homeownership and the rise in demand for rentals is directly influencing the growth of private firms looking to fill out real estate portfolios as well as property management groups that have scooped up business from investors who have no interest in the day-to-day of being a landlord.
Some 82% of consumers believe owning a home is a critical part of wealth building but 18% said they are not willing to assume the risk of a mortgage, according to a National Foundation for Credit Counseling (NFCC) survey. The unwillingness to take on a mortgage loan may be a smart decision for some, as many borrowers have learned the hard way that homeownership does not come with a guarantee of continually increasing equity. The “Generation Rent” phenomenon is not just about younger Americans. As a societal shift has slowly emerged to redefine the American Dream, many older Americans with empty nests are also exploring apartment living. Apartments are a maintenance-free alternative to single-family homes and retirement communities. They also allow residents to move closer to shopping, dining and entertainment venues, making them more accessible to aging Baby Boomers.
For many years, homeownership was a policy objective of the federal government, which symbolized a level of achievement for a person or family but these days many are taking a closer look at whether the costs and benefits of home ownership outperforms the cost of renting. People are realizing that coming up with funds and motivation each month for maintenance and up-keep isn’t feasible for economic, medical, lifestyle or other reasons. If generation rent continues, a slow down in home sales is bound to have a ripple effect. If renting remains a popular choice, it will certainly have an impact on the broader economy starting with the home building industry. There would be a move away from single-family construction to multi-family.
In the short run, renting can make more financial sense than buying but the downside is that over time rents tend to rise while most mortgages remain fixed. Owning can still be worth it but it is a choice that needs to be carefully considered. Many people today can rent better than they can own. The downside of renting is being stuck with current inventory. You may not get exactly what you want when you go out to rent. You get what is available in the market today.
From MSN Real Estate