The decision to buy your first home is not something to take lightly. In fact, many individuals put it off simply because the idea of making a purchase that large and significant can be scary. Even more, buying a home is a major decision that requires commitment, preparedness and at least some level of financial stability.
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For those who feel like they are not quite ready to take the leap into homeownership, renting has been a flexible, affordable and realistic alternative. Until now. As rent prices continue to increase across the country, purchasing a home is starting to make more sense for many individuals.
To really put things into perspective, let’s take a look at the circumstances of our fictional friend, George. George is currently paying right around $1,200 in rent each month for his apartment. His rental costs are comparable to what many people have as their monthly mortgage payment. If he is going to spend this much money either way, it makes more sense for him to buy a home and have the opportunity to build some equity of his own.
In 2014, renters throughout the United States paid $441 billion in rent, an increase of $20.6 billion from the previous year. Additionally, data released just a few months ago showed that rent increases are outpacing home prices. In April, Zillow reported that the median rent in the United States had increased by 4% from the year before, while home prices only saw a 3% growth.
It is also important to note that millennials accounted for 32% of the housing market in 2014, and this trend of young professionals becoming homeowners is likely to continue. Along with rental rate increases, millennials are also starting to feel more secure in their jobs and with their salaries, as the economy continues to improve. Now that many young people in their 20s and 30s are starting to see a steady stream of income, many have the opportunity to start saving up for a down payment.
All of these factors combined are creating the “perfect storm” for an influx of first-time homebuyers. Many millennials are trying to be smart with their money, and investing in a home rather than paying an increasing amount for rent each month is just one change they are deciding to make. As long as they are able to afford the down payment, young professionals will likely produce the newest wave of homebuyers.
