There’s a ton of advice out there about rent being a black hole, telling you to buy a house as soon as possible. Apart from that, you might be feeling the pressure, especially as you approach your mid-to-late twenties, to make those next steps in life. Family members can have some pretty pushy expectations about when you should be married, settling down, buying a house, and making those transitions.
Of course, life isn’t quite that simple for the millennial generation. Apart from the fact that apartments are more convenient for urban job centers, we’re tackling debt and in many areas, ridiculously high prices.
So, how much should we be worrying?
Getting Over the Stigma of Apartments
Here’s the thing about apartments: Industries respond to the changing needs of their audience. This applies to both the housing market and the apartment market. The average home-purchasing age has risen, and it’s currently at around 31. In response to the fact that people are living in apartments longer, apartment managers are changing the way they do things. Demand for housing and apartments are both rising in the US, with the average apartment dweller between ages 20 and 30.
In turn, apartments are becoming synonymous with city professionals. New buildings are popping up with better amenities, and managers are expecting a lower rate of turnover, as they’re expecting millennials to stay in apartments for five to seven years.
If an apartment is convenient for your career, for travel, or for transport, then you shouldn’t feel pressure to upgrade to a home. Especially if you can work out a mutually beneficial arrangement with your landlord, renting an apartment can be the best investment for many.
Buying a Home Is NOT an Investment
Buying a home is often seen as an investment. But it’s not. Especially if you do it before you can afford it. Talking to Business Insider, real estate professor Todd Sinai explains why the narrative about home ownership needs to change.
In simple terms, the idea of a house as an investment comes from the sense that you can sell it for a return, and in the right circumstances make a profit.
But unless you’re flipping houses, what you’re actually doing is taking on debt. Debt has interest, and the buying / selling process comes with extra costs. Sinai says that the cost to you on buying and then selling a house is around 10 percent, so you need the home’s value to appreciate by at least 10 percent, just to cover the costs. Now you’re breaking even. Add into the mix that at best a profit is not guaranteed, dependant on the housing market. At the worst, the house could lose value.
Even if you do end up making money at the end, you haven’t necessarily gained the spending power to buy a nicer house. Let’s say you get lucky and the market value of your house improves. You make a profit on the sale. Well, now you need to buy a new Carolina Forest house in a market with homes that are more expensive. So you’ve gained money, but you haven’t necessarily gained spending power.
Just getting equity isn’t a good excuse to spend more money. You wouldn’t spend money you don’t have on the stock market just because you might get a payout (or at least, I hope not). Spending extra money that you can’t afford on housing is pretty much the same. If you can’t afford it and struggle to make ends meet, the equity doesn’t matter.
When Is the Right Time?
You might very well be in a position to buy a house. So let’s look at the practical considerations that can help you with the decision. Here are a few ways to tell if you’re actually ready to buy a house.
“Can you afford it?” isn’t just about how much money you make. How much money do you make compared to the living expenses in the region in which you’d be living? How much more would you spend on travel, food, utilities, in addition to the mortgage? The other consideration is job security. How stable is the company you’re working for, and do they perform layoffs?
The next serious consideration is debt. Putting off paying your debts down in order to buy a house is going to compound your financial troubles, not ease them. Under many circumstances it makes a lot more sense to pay off debts than to start trying to build equity with higher expenses. Debt is also taken into account when you’re applying for mortgage loans, so taking a few extra years to pay down debt could mean that you’ll get a better loan when you do buy.
Do you have savings? Because you’re going to need them. With loans comes down payments. And the house-buying process is riddled with extra fees like tax payments, home inspections, HOA payments, and more.
Honestly, all Other Things Aside … Don’t Do it Until You’re Ready
It’s perfectly reasonable to just not be ready to settle down. Seriously. Forcing yourself to buy a house just because you should traps you into a financial and living commitment that you might not be ready for. If you’re not yet sure where you want to be, where your career might take you, or if you just like being where you are … That’s fine. You don’t need excuses to live life the way that makes you happy.
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