This might be due to misunderstanding of the economics involved on my part, but I don't see this happening unless the cost of renting in desirable areas drops substantially enough that yearly price increases can no longer present a substantial risk to the average individual's financial stability. Needing to periodically move to keep rent affordable and the anxiety that comes with always having to think about where you're going to have to look next gets old really fast.
From my perspective as a mid-30s millennial, much of what's fueling desire to own a home right now is the ability to turn housing costs into a semi-fixed and mostly predictable expense, even if mortgages aren't all that much cheaper than renting in the short term. That assurance is worth quite a lot.
I find that it’s difficult to change anyone’s mind on this subject, but the issues I often see are:
1. Overestimating the predictability of the costs of owning a home. As a renter, I know exactly what I will pay for the next year. A homeowner doesn’t have that same knowledge.
2. Comparing rent to mortgage for equivalent properties. Yes, renting the same property will generally compare unfavorably to purchasing it. But compare a 2-bedroom apartment to a 4-bedroom home and the apartment becomes much more competitive financially. However then it comes down to personal preference for the place you want to live, not a rational cost analysis.
3. Underestimating the stress of owning a home and overestimating the stress of renting - but this is also mostly a personal and perspective thing.
The calculus is naturally going to differ depending on the individual, but for points 1 and 3, if you can find newer construction within budget that's more likely to have been built to code and not in need of critical maintenance, things will likely work out in favor of homeownership.
Having previously been renting in the SF Bay Area, ownership worked out much better in my case. With the rate that rent had been increasing there it'd take several bad unexpected house repairs each year to equal the increases.
Factoring in planned improvements might make money spent over time more of a wash, but the big difference there is that I can save and plan for improvements… point in case I have planned major bathroom renovations that I've been sticking money into a high yield savings account for. If push comes to shove, don't actually need to do the renovations though, and that money can go towards other more important things helping mitigate or prevent financial disaster. On most peoples' salaries that's difficult to do when renting unless you're renting something so small that it's difficult to use as anything but a place to sleep.
> On most peoples' salaries that's difficult to do when renting unless you're renting something so small that it's difficult to use as anything but a place to sleep.
This is kind of getting at my point and prediction. Cars were once seen as Freedom Machines that people were dying to operate when they turned 16.
I believe in future generations will see housing as more than a place to sleep but won’t continue to drool over a 3 or 4 bedroom single family home. People are having fewer kids and the climate is going to make maintaining a yard a bigger hassle and cost in many areas.
> a semi-fixed and mostly predictable expense, even if mortgages aren't all that much cheaper
Sorry I break the bad news - As a homeowner, this is not an advantage of owning a home. Houses are MASSIVE money sinks. The cost of rent is MUCH more predictable.
Well, two years in that hasn't been my experience. Costs have so far been minimal and well below what rent increases would've been. Things can and will go wrong but it'd take something pretty crazy to nullify the money saved on rent increases already, let alone if things continue as they have been.
Even when a big unexpected house expense inevitably happens I will have had the benefit of having been able to invest the cash that would've otherwise have been spent in the meantime somewhere where it's making some interest instead of going into the black hole of rent with no returns at all.
Well, it's easy to have two good years. It's also easy to have a bad two years with multiple major repairs.
I went one year where I spent at least $16,000 on repairs.
But that's the point - having $16,000 in repairs unexpectedly is the opposite of "semi-fixed and mostly predictable."
In the 10 years I rented I always rented from small landlords. I had three apartments during that 10 years. Because of that I've never had my rent increase without moving.
As far as black holes go - I spend more than $600/month in just property taxes and insurance. Add to that $360/month currently in interest.
But if your rent is equal to your mortgage (very doable in many places, albeit for different properties), you do not need to uninvest that money for unforeseen expenses.
From my perspective as a mid-30s millennial, much of what's fueling desire to own a home right now is the ability to turn housing costs into a semi-fixed and mostly predictable expense, even if mortgages aren't all that much cheaper than renting in the short term. That assurance is worth quite a lot.