Why would Millennials rather rent a $1500+ studio w granite counters than live w roommates 1st &save for a downPMT

The generalization and tone from the OP make me think he's pissed some kids have nicer stiff than he does.A lot of people value the flexibility of renting. I'm not going to buy a house when I dont know where my life will be in 5 years.

Granite Jizz 🤗🤓 wrote:

Why would Millennials rather rent a $1500+ studio w granite countertops/super fancy loft than live w roommates 1st &save for a downPMT?

Just doesn't make sense to me. Why not rent with roommates temporarily and buy within a few years?

Boozer fachl wrote:

A lot of people value the flexibility of renting. I'm not going to buy a house when I dont know where my life will be in 5 years.

This is huge. I just bought a few years ago, job went south and now I want out. People forget about closing costs, eats into sales price profits. Good news is, my house has gone up enough to cover closing costs.

sock puppet wrote:

Runningart2004 wrote:

For the record I rent a 5bd/2ba 2400sq/ft house built in 2011, formal and informal living and dining rooms, granite countertops, all stainless steel appliances, giant back yard, privacy fence. I would buy in a heartbeat if I was actually going to be here for more than 3 years.

Alan

2400 sf but you have 3 rooms you have to furnish yet never use. Who the F wants formal and informal dining living rooms yet you have 5 BR and only 2 bath. Would you use plastic couch protectors like my grammy? We use that room once a year to open presents. It sat unused 364.

And we only have one kid so A LOT of the house is rarely used. But it's a single story, and price per sq/ft was easily best in the neighborhood. A basically identical house down the street was renting for $200 more a month.

Actually I miscounted, there are 4bd not 5.

We have a guest room for visitors, which we use a handful of times a year when family flies in, and the 4th bd is used as an office/library. The front room/living/dining room is basically a game room/workout room.

Alan

There is also a difference between need and want. We really only need a 2bd/1.5ba and if we were to go on post that is what we would likely be stuck with.

We narrowed it down to one of two neighborhoods and this house was the best for the money. Rental properties are in abundance around major military bases.

Alan

Granite Jizz 🤗🤓 wrote:

Why would Millennials rather rent a $1500+ studio w granite countertops/super fancy loft than live w roommates 1st &save for a downPMT?

Just doesn't make sense to me. Why not rent with roommates temporarily and buy within a few years?

Idk

plog wrote:

I think they can see through the home-ownership BS older people latch on to and have realized it isn't that great of investment that everyone thinks it is.

https://www.moneyunder30.com/why-your-house-is-not-an-investment

This. Despite a lucky 1% of people who bought in the right place or the right time, you've all been lied to.

Granite Jizz 🤗🤓 wrote:

Why would Millennials rather rent a $1500+ studio w granite countertops/super fancy loft than live w roommates 1st &save for a downPMT?

Just doesn't make sense to me. Why not rent with roommates temporarily and buy within a few years?

Why do old farts generalise young people?

Safe Space Odyssey wrote:

plog wrote:

I think they can see through the home-ownership BS older people latch on to and have realized it isn't that great of investment that everyone thinks it is.

https://www.moneyunder30.com/why-your-house-is-not-an-investment

This. Despite a lucky 1% of people who bought in the right place or the right time, you've all been lied to.

I take it you didn't read the whole thread. That article is garbage.

That works if you stay in the same place for 20 years or more as you apparently have. For the median home owner, the number is more like 6 years. For someone entering the workforce, the option to relocate quickly is perhaps more valuable than the equity realized in the first year of a 30 year mortgage (approximately nil excluding capital appreciation). Even for those who don't wish to relocate, the *type* of housing they will need is likely to change over a 20 year period. For example, as a single person a small condo in the city might be desirable, but then when they marry and have kids that 400sq ft condo gets old quickly. Also one thing that you did, which todays buyer cannot do, is time the market ! Price/incomes were much lower in 99 than they were at the top of the bubble, and depending on the region, compared to where they are today. So the real winner on the other side of the argument is that the guy who rents today can easily relocate for a better job. That plus the option to move to different housing (e.g. only go with those higher interest payments/taxes/carrying costs of a larger place when you actually need the space, good schools, etc). If he puts the downpayment (say 46k=20% of 230k) into S&P funds, he made about 40k, so you're only ahead by 60k after maintenance costs even though you timed the market quite well.As always going with Occam's razor -- in markets where young people don't buy houses as much, it usually has a lot to do with the price of the houses and their incomes. It's always worth checking these numbers (prices and incomes) before going off on some sanctimonious rant.

Do as I do wrote:

Millennials are terrible with the Maths and investing as a whole.

I'll toss out another example, which will no doubt fall on deaf ears...

Bought my house in '99 for $230K. It's now worth about 440-450K. Was worth a little more at the height of the housing craze. I probably put $100K into remodeling projects over the years.

You may debate about whether I could have broken even by renting instead, but my mortgage will be paid off in 22 more payments at which point we'll compare our monthly housing payments when mine drops down to about $400 for taxes and insurance. Yes, I'll have a few more utility and maintenance payments than a renter, but do you really think you've got a winner with the other side of the argument?

I know I am jumping in late here, but the OP nailed a great question.

It's just the world we live in. I am now 27, went to college, graduated, and started down my own path. I have a lot of friends who got stuck in a rut after college.

I am a firm believer that there are many issues with my generation, and it stems from the lack of knowledge of the real world you don't get in high school or college nowadays.

My brother is a great example. He graduated top of his class at a major university and got a wonderful job, nice pay. But he called me up one day freaking out that he has no money. He rents a downtown apartment, to be close to all the "bars, nightlife and girls". Leases a car, and drives to a job where he works all week.

Between paying the rent, the car lease, and student loans he has nothing for himself.

After years of college, simple questions like you don't own anything with cash value if you got hurt, like your own place, your own car, guns, ammo, anything you can sell. All he had was a big T.V and video games...and a new bed he was paying on. The american dream is a altered vision in the new world.

After having a serious talk with him, the number two poster was correct, my younger brothers biggest concern was, how the hell am I gonna meet and bang hotties haha.

At the end, he moved out of his rental apartment, and I found him a Trailer in a trailer park about 25 mins outside of his city. He paid about 4 grand for the trailer, fixed it up a little, and now pays about 150 a month for the lot rent, most of his neighbors are old folks and he even has a nice big back yard. He now owns that outright all paid off, even if it only is trailer. Next, he bought his own old shitty car, for cash of craigslist. His bills went from about 2,500-3,000 a month, to 300 bucks to have a roof over his head.

The biggest selling point to push him over the edge was a trick I taught him about how I found my girlfriend. You don't want a chick that wants to come back to your place and hook up with you, because of your expensive place, or nice car lease. That will always end in flames (while hot and fun) when she sees you really dont have a lot of cash to take her out and maintain what she wants in a lifestyle, plus you don't want the girl at the bar looking for that.

What you want is a girl that is smart enough that can accept WHY you live in a trailer, why you drive an old ford truck. That's because after meeting in a bar for the night and going on a dinner date later, if you really think she is great you can tell her to take a weekend off, jump on a plane to seattle, or san fran for the weekend, rent a car, hotel, and blow her away, because now he isn't living pay check to pay check hoping to pay for the rent, car, and student loans every month.

One day he will buy a downtown condo if he wants, but try not to rent, and if you have a job to rent see if you can buy something! and not this 100-300k dream house. Jump on craigslist, look at homes for sale buy owner, and put in a price of under 25k, you will be shocked at what comes up. And after a few years of living in a trailer or something, it will be nice with those student loans paid off, or an extra 100k in investments.

Happy new year.

This is a very specific strawman, but I guess the gist of your post is this:

1. "Why don't Millennials want to buy a house?"

and

2. "Why are Millennials bad with money?"

The answers, in my opinion:

1. tl;dr "We move a lot"

Millennials tend to hop from job to job in hopes of moving vertically within their career (or vertically outside of their career, even) for several reasons. Being locked into a 30 year mortgage doesn't make sense for many of us...especially if we're not living there for 5 years or more.

2. tl;dr "We aren't any worse than previous generations"

"Why would Millennials rather rent a $1500+ studio..." etc.

Well, here's my anecdote: why would my median-wage earning, high-school educated parents buy a $375k home in the suburbs AND a $100k+ cabin in the Appalachians AND have 4 children when my father has worked a relatively low-wage blue collar job his whole life and my mother didn't start working until 10 years ago?

I think it's stupid to be drowning in debt - mortgage or otherwise. As a Millennial that just paid off $70,000 in student loans, I have no desire to go back into significant debt despite the idea that I will be gaining an asset that *might* appreciate in value.

The housing market crashed once. It could crash again. I don't want to be attached to that sort of uncertainty and neither do many of my peers.

Great answer, and I neglected to mention "student debt" in the list of reasons I gave but that would be one substantial road block to taking on debt. For all the sanctimonious platitudes that get thrown around, the simple reason that more young people buy in some years than in other years boils down to money (how much do they earn, how much do they have to borrow to buy a house, and how much additional debt they are able to service given current interest rates) The current generation of potential new home buyers are pretty bad at math but so are all the generations that preceded them !

I agree that if for some reason, you are unable to hold a job for more than a few years, you shouldn't buy a house. I had 13 years with one employer, and am working on 16 with my current one, which make up the bulk of my career between the two. Both employers were in the same area, too.

The odds of "timing the market" are in your favor, though. I bought my first home in '91 for $105k and sold it 8 years later for $135k. The market had accelerated in the years prior to '91, and some of my neighbors who had bought within the previous 5 years had purchased their homes for as little as 70k. Had I chosen to stay put, my home would have been paid off years ago and would now be worth about 275k. Still a great move despite "bad market timing."

You have to be mindful of local market conditions. In my area there's a lot of demand for housing and not a lot of inventory. House prices are increasing and rents are going through the roof because no one is building houses or apartments. We'll probably see things start to slow down when interest rates rise, but until supply matches demand here, home prices and rent will go up.

I bought my house in the fall of 2014. My mortgage is about $1350/mo (including tax and insurance). Rents for comparable homes (3BR/2BA, 1400 sq ft) are $1750-1850, depending on if lawn care is included. I basically sock away that extra money I'm not spending on rent along with my tax savings and put that to maintenance and upgrades. I even come out a little ahead, plus I'm building equity.

I couldn't predict that rents would increase so much, but when I ran the numbers before I purchased the house, it was still a better deal to buy than to rent. Using recent sale data, my house has appreciated about $50,000 in value since then. Not that I'm planning on selling anytime soon because I like where I live and there are plenty of employment opportunities. I also don't expect to see gains like this continue. The value may even go down at some point. But because I put 20% down and don't use the equity like an ATM, it can lose over 33% of its value before I'm underwater. The odds of that happening in the current climate are pretty poor.

Bottom line, owning a home can be a pain in the ass, but it can work out favorably from a financial point of view. Run the numbers, be aware of what it takes to own a home, and don't buy more than you can afford.

My family has been in Ballard since the 1920s, I grew up a little farther north but lived in the area during college in the early 2000s. The transition is sad and some of my friends are that exact stroller crowd. At least the Smoke Shop still has come core!

Anyways... I'm a millenial and a homeowner. My ownership was brought about through a protected employee housing market in my area; otherwise I wouldn't have or been able to buy. Student loans and freedom are the two big things for people in my social circle, if the market price isn't a special concern.

jamin wrote:

benn wrote:

It's a bargain compared to where I live.

http://www.zillow.com/homes/for_sale/Palo-Alto-CA/pmf,pf_pt/19497805_zpid/26374_rid/globalrelevanceex_sort/37.508908,-121.915627,37.254653,-122.35508_rect/10_zm/

I love how the owner lists the fact that he can walk to the bus stop as one of the great things about the house. Because walking to the bus stop is one of the amazing privileges to look forward to if you're going to be a multi-millionaire.

Think about this: If you found a house around the same area that was $12k/month instead of $13k/month, you could use that extra $1k/month to have a limousine drive you to work every day.

I see your point Benjamin, but you are bad at math. There are 22 work days in a month if you work 5 days per week. $1000/22 days = $45 per day.

Do you think you could hire even a taxi in Palo Alto to take you to work and pick you up for $45 a day? Some people do take the bus, or ride their bike.

It's not just a question of whether or not you're "able" to hold down such a job. You might work for a startup or a smaller company (potentially very high upside/opportunity for promotion but also high risk that the whole organization folds). You might decide after a few years that you *want* to work some other place. btw if you put a 20% downpayment (21k) into the S&P 500 in Jan 1991, it would have been worth over 80k by Jan 1999. Over 60k capital appreciation without leverage -- it was a boom stretch for the stock market. As far as timing the market is concerned -- it's not a great time right now but you could do worse. As far as the math of this is concerned -- most calculations give you about a 6 year or so break-even window (given a lot of assumptions including that the place you rent is comparable to the place you would buy). Basically carrying costs of owning are usually cheaper than rents (otherwise landlords couldn't make any money) but if you buy/sell too often transaction costs destroy your margins. My own experience -- at the time I was renting *and* not looking to buy a house, I didn't make anywhere near enough money to save for a conforming loan downpayment on a place I'd be prepared to live in. I took the deferred gratification route in my 20s through early 30s (cheaper rentals), but in hindsight it didn't make much difference -- if I had spent an extra 300/month or so on nicer apartments it wouldn't have made much difference to my ability to buy a house. One thing I think was important though was to always let your lifestyle stay a few years behind your career -- e.g. live like a student for the first couple of years after you graduate, etc. Try not to be completely maxed out whether you're owning or renting. That really adds up over time.

I purposely left the reasons generic to cover both circumstances (as you describe) and character reasons for not holding a job long term. Even in the latter, there can be positive reasons for being a short-termer, such as the desire to gain a foothold and experience in an industry for a few years before jumping to a better opportunity to cash in on that experience. Wasn't trying to say that everyone who leaves a job after a few years is unreliable or lacks the maturity to buckle down and work through unpleasant circumstances.

I agree that you could win the argument that from 91-99 my 10% downpayment would have done better in the market. But my house would have been payed off at least by 2010 if not sooner, at which point my monthly housing costs would have dropped to about $300/mo for taxes and insurance. Maybe twice that to cover maintenance and other minor utilities normally not paid by renters. I would have been saving about 1400/mo compared to a similar rental plus gaining equity as the housing prices rise while avoiding rental costs which also increase each year. Could have lived there "rent free" for decades until I sold the place at a ripe old age.

There's also value in having the pleasure of living in your own home, making any modifications/updates you want throughout the years. More years than not, I forgo a vacation in exchange for a stacation and some upgrade around the house that I'll enjoy for more than a week. My home is the most satisfying investment in my portfolio.

I have a 30 year old colleague who spent 2,400$ a month to rent an apartment in the upper East side of Manhattan. He bought a 2 bedroom co-op in Forest Hills, Queens and pays the same in mortgage and maintenance fees and has more space. He gets back some of this money after taxes and is building equity. When he is my age and making twice as much as he makes now his fees will seem negligible.

I too can't figure out why people waste their money renting small fancy apartments in my area.