As an active Realtor in Houston, I encounter many individuals and families that are challenged with the issue of renting vs buying. Whether they’re the Millennials or Baby Boomers some of the same issues apply. Let’s explore some of the facts around this issue.
According to a recent article by Bernice Ross, The real reasons millennials aren’t buying homes: Part 1, homeownership peaked in 2002 at nearly 70%. Flash forward 10 years and the home ownership has dropped to 65% in 2013. Some of the drop is attributed to the “correction after 2008, but also a drop in first-time homebuyers, rising housing costs and income levels that have remained stagnant for several years.”
In my everyday experience discussing home ownership, and having deep conversations about personal finances, job security, and available homes, I’ve surmised that there is a significant lack of consumer confidence that is real. Consumers are very aware of market conditions, and the volatility of various job industries. Thus, the behavior is to minimize risk and find the best alternative to buying which is renting.
The $64,000 dollar question is when will this turn around? Your guess is as good as mine. I will say that it is an individual by individual situation, so there will be some home buying but a lot of consumers will continue to rent.
Unfortunately, while there is a fixed upfront cost for consumers to “manage”, the long-term loss is deceptive and financially problematic. See the chart I’ve included to illustrate the long term savings at higher rent costs vs paying a mortgage payment.