Would you rather buy an avocado toast or a house? Well, depending on whom to ask. Millennials are more likely to choose avocado toast as the house is too expensive. However, this is not always the case. The avocado toast fight between Millennials and Baby Boomers has started after a recent 60 Minutes interview with an Australian millionaire Tim Gurner who expressed his worries over how much money Millennials spend on breakfast, while they talk about the inaccessible housing market.
Young people, specifically millennials are not willing to invest money in cars and houses like the previous generation used to. So what is causing this worrying trend?
In fact, experts believe that there are both economic and lifestyle reasons that keep the homeownership rate low for young adults.
First of all, it is not as affordable as it used to be. Real estate market has gone from “pricey” to “absurdly out of reach” in the past decade. Moreover, it’s much harder for Millennials to get a mortgage. Another financial issue that influences the Millennials buying decision is an increase of interest rates and mortgages that are becoming more expensive so that a lot of Millennials need to make larger student loan payments. According to the survey, 60% of first-time homebuyers finding it difficult to get a mortgage are millennials. The other thing is that incomes have decreased. The average Millennial earns about $35,000 a year now in comparison to $40,000 that his parents could have earned.
However, there are not only financial reasons for delaying home ownership. Lifestyle changes also play an important role. Unlike older generations, the majority of millennials prefer to rent. They would like to stay mobile which cannot be achieved through buying property. In contrast, with a rented apartment they don’t have to worry about maintenance, safety and the need to sell anything if they decide to move.
Another reason is that Millennials don’t want to buy homes until they are married. And the problem here is that they typically delay marriage compared to their parents. With a past few decades, millennials have delayed marriage by about six years compared to previous generations from 23-29 for men and 20-26 for women. And since it’s difficult to get loans before marriage that also affects homeownership rates. A good solution for millenials would be to get an FHA loan which would only require them to put down 3.5% of the down payment.
How Millennials Can Acquire Property
Although Millennials are more likely to rent than buy property, there are several options for them to get into the sector of real estate.
Direct Lending
Millennials that are interested in buying houses but do not want to be involved with banks can choose a loans direct lender. One of the biggest benefits of payday loans lenders over traditional banks is that it’s often easier to quickly solve any issues as you can talk to the lender directly. Another significant benefit, especially for first home buyers is that there are better chances to get money from the direct lender than from a bank.
Although many people tend to trust banks more than online lenders there is an increasing number of people that prefer putting their trust in online loans. More and more people choose to deal with lenders exclusively online without any additional trips to the bank. Apart from saving time, as online lenders do not have any extra expenses on offices they usually offer lower interest rates and fees which can be a huge save of money.
Real Estate Investment Trusts
REITs are relatively new financial innovation that was created to make it easier for individuals to gain exposure to real estate investments. Millennials that still have an interest in buying property but do not want to be involved into burdening management can put their money into REITs. Before this option has emerged, investors needed a lot of money to buy a house. Now even investors with low earnings can participate in this portfolio by buying shares of a REIT, which can become a great passive income source for millennials.
Conclusion
Millennials have distinctively different attitudes than the previous generations affected by certain historical events as several financial meltdowns and housing bust. They are tech-savvy, diverse, and the reality is – they are activists for change. Moreover, by 2018 Millennials will have the most spending power than any other generation. Although millennials have postponed buying property for a number of financial and lifestyle reasons – including student debt, low salary, and inaccessible housing market, now the generation Y is approaching the mid-30s, meaning that they finally will be thinking about things like property and marriage.
