To Buy Or Not To Buy

By DiAnne Crown

May 1, 2017 4 min read

The millennial generation (typically thought of as encompassing all those born between the years 1981 and 2001) has arrived at the age of maturity -- or so the housing market would like to believe. But can they, and will they, become homeowners this year? Well, maybe.

According to a 2016 study by the Pew Research Center, in recent years, young adults have become the most likely group to live in multigenerational households (previously, it was the elderly). As Catherine Rampell of The Washington Post notes, this isn't just because today's young adults love minimalist, communal living. Although many millennials do espouse a desire to keep their assets liquid and employment and relocation options open, Rampell asserts others would own if they could afford it.

NerdWallet agrees. In fact, according to their research and analysis, millennials "look upon owning a home just as favorably as previous generations." NerdWallet notes that a Fannie Mae study from 2014 found, "The majority of millennials said they consider owning a home more sensible than renting for both financial and lifestyle reasons -- including control of living space, flexibility in future decisions, privacy and security, and living in a nice home." But given such factors as student-loan debt and a lack of full-time employment options, the majority of millennials have a harder time putting away any savings.

This is an especially dire reality for those young adults who grew up in poor neighborhoods and did not attend college, says Derek Thompson in The Atlantic. These millennials are not likely to leave their hometown's ZIP code, let alone move to an entirely new city and buy a home, says Thompson. "Poorer, less-educated, and stuck minorities have often traded homes and apartments for their childhood bedroom."

It might be their debt-to-income ratios, a lack of information about down-payment options and insufficient credit history that are prohibiting millennials from purchasing homes. Or it might truly be a matter of traveling light in the name of personal freedom. Whatever the case, consumer education is power.

One longtime resource for budgeting advice, including whether to rent or buy, is the website of businessman Dave Ramsey. The site features articles about when, and if, a home purchase is the right choice.

The best time to purchase a home, according to Ramsey, is when "you're out of debt; you have three to six months of expenses in your emergency fund, plus enough cash for a 10 to 20 percent down payment on a 15-year fixed mortgage; you're paying cash up front, or your mortgage payment is no more than 25 percent of your monthly take-home pay."

But millennials should take heart: "There's nothing wrong with renting while you work to get your finances in order," says Ramsey. "Take time to lay the right foundation before you take the leap, and your home will be a blessing instead of a curse."

So, yes, some community-minded, optimistic millennials are bunking down with family to keep their eyes on a broader horizon, and others simply can't afford to buy a home. But the savvy shopper will have a sound budget before buying, whatever the cost.

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