Millennials are the largest class of homebuyers in the market and will have paid more for rent than any previous generation by time they are 30, according to a RENTcafé report.
Rent prices are increasing and millennials know they’re investing in their property with every upgrade they make, according to a report done on RENTcafé by Florentina Sarac about the average amount millennials pay in rent by the time they turn 30.
“It would seem appropriate for older millennials to shift to home ownership once they can afford it” Sarac said.
Divided into two groups, there are the younger millennials, between 22 and 29, and the older millennials, between 30 and 40, said Sarac in a report done on RENTcafé about the average amount millennials pay in rent by the time they turn 30. The total was compared to previous generations.
The report concluded younger millennials will spend an average of $97,400 on rent by their 30s, approximately $7,000 more than the older millennials. Sarac predicted the trend will continue into Generation Z, those born after 1996.
“Generation Z will probably have a medium income of $219,608 between the ages of 22 and 30 and a rent burden of 46 percent,” Sarac said, 1 percent higher than the rent burden the average millennial currently faces.
The recession and social factors have set the younger and older millennials apart in terms of what time is suitable for home buying between the older and younger millennials, the report from Sarac stated.
In a separate online survey, Sarac said RENTcafé discovered the top three reasons why people don’t buy a house:
• Cannot afford a home.
• Not eligible for a loan.
• Desire for more flexibility.
Geoff Rooker, branch manager at Primary Residentail Mortgage, Inc. said, “It seems millennials are avoiding purchasing homes in urban areas because of cost and inventory, especially in the Phoenix and Scottsdale areas. Homes in popular urban areas cost an upwards of $400,000 and most millennials, while they’re working and have stable jobs, are still trying to build their savings and pay off student debt.”
The nationwide, multi-billion-dollar franchise, Primary Residential Mortgage, Inc., contains an online digital loan application to simplify the process for its applicants, Rooker said.
Kelly Keiter, spokesperson for Primary Residential Mortgage, Inc. said the average millennial sees the value in purchasing a home because rent is rising, and the typical monthly rents are the same amount, or higher, than the average mortgage payment on a lower-end home.
“Renting is basically paying your landlord’s mortgage. So, there is the joke, would you rather pay your landlord’s mortgage, or your own mortgage?” Keiter said.
Megan Augustin, who is 31 with no student debt, recently purchased a home with her boyfriend after the two rented for over eight years throughout Wisconsin, Portland, Oregon, and cities around the Phoenix Valley to see what area best suited them before the couple decided home owning was a responsibility they were ready to handle.
“In Portland, the houses were way too expensive, and we couldn’t afford them so we had no choice but to rent,” Augustin said.
Augustin said she initially had the idea to build her current house’s equity and make an investment after the couple decided to sell the house and move to another home but that may change with time.
“In the last three months, our thought process has actually changed. We’re talking about things we can do so we can stay in the property longer now rather than move in a couple years,” Augustin said.
The couple has been in their new home for a few months and have had to make financial sacrifices, Augustin said.
“We’re from Wisconsin, originally, so we haven’t been able to go home as often as I want, but honestly, it’s all worth it,” Augustin said.
Rebekah Miles, 22, is a bill collector who recently moved into the home she purchased alone after setting a goal one year ago to become a homeowner.
Miles said she sought a home with good resale value and a good location.
“The intention is it’s an investment property,” Miles said.
Students loans from her attendance at Northern Arizona University haven’t inconvenienced her because “I’ve been paying as I’ve been going,” she said. The only financial sacrifice she made was to buy a home over paying off her car.
