The Young and the Renting
A recent Pew research report showed that 39% of young adults ages 18-34 have returned home to live with their parents, after struggling to support themselves on their own.
Naturally, the younger in the group are more likely to live at home than those at the older range. However, the percentage of those living at home by age groups reveals that the numbers are high for all young people. The statistics show 53% ages 18-24, 41% ages 24-29, & 17%, ages 30-34 have moved home.
These results are not surprising considering the unemployment rate, which is particularly high among young people. In addition, some are straddled with student loan debt which is at an average at an all time high at $26,300.
But, nevertheless, there are still many younger people who are employed, on their own and renting. Rent rates have been rising, while home affordability we are told is at a greatly improved level. So, why not buy?
The answer is that there are reasons to continue renting, rather than owning, one’s home. Even those with an income and no debt, and enough cash for a low down payment, are beginning to doubt the wisdom of jumping into home ownership. In spite of almost record low 30 year fix rates renting is an attractive option for many in that 18-34 age bracket.
Question is when will this change?
The obvious answer is that these things will need to happen before younger renters become buyers en masse; 1. the economy gains traction and job numbers really start to pick up, 2. incomes look like they are growing and 3. home prices are rising once again and not with the current accompanying inventory drop.
But, what if even when the above happen, we still don’t see a return of renters to the buyer column?
What if we lost a generation a home buyers? Many people talk about how the stock market may have lost a generation of investors. Over the last 12 years we have witnessed two stock market crashes, a flash crash, fat fingers, and general frothy turmoil which seeds fear of participation in some potential investors.
So, will this last housing bust leave doubt and distaste in its wake? Have those who may qualify down the road lost that loving feeling? Is it gone, gone, gone?
My first answer is yes but with a caveat.
True, I have seen for myself a lack of enthusiasm for home buying in this market among the 18-34 crowd. Saving for a down payment is always the first issue. Not only is it difficult to amass the traditional 20% down payment, for many just 3.5% down payment seems daunting. The drop in home prices makes homes more affordable than they were for first time home buyers, but the goal remains elusive for a good chunk of them.
But there are those who can afford to become homeowners. What of those? Even they are not convinced its right for them. I often hear those in this age group say, “Why should I buy a home when I know I am going to move? Maybe if I knew I was going to stay in one place and have settle down I’d feel differently.” That is a reasonable, if not outright accurate, reason not to buy. Being nimble, without ties, in this new world economy can give you an edge.
Also, this generation is settling down and forming families later that the previous generation. Getting married and having kids isn’t something that needs to be done in your 20’s any longer. First marriages and children often are delayed now until one’s 30’s.
A very few have expressed that not dealing with taxes, HOA fees and not being obligated to fix up the home is a plus.
So, besides the fact that Americans can’t qualify for loans, maybe some that can would rather rent until they are more settled in their life style
A lot of things have changed in America because of our debt blow up, our current debt situation and the future debt problems we will have if we don’t get some order from chaos. And, so, along with and in reaction to all that financial drama, maybe a generation will wait just a bit longer to buy a home.
Logan Mohtashami is a senior loan officer at his family owned mortgage company AMC Lending Group, which has been providing mortgage services for California residents since 1988. Logan is also a financial columnist for Benzinga.com and contributor for BusinessInsider.com
Read more: http://www.benzinga.com/trading-ideas/12/10/3031354/the-young-and-the-renting#ixzz2AQef3KBV
And the saga continues….. 🙂
Yes, keeps getting better and better
Apartment management along with realtors are the worst people in the entire world! They are “those people.” They never negotiate anything and they never do anything fair. Be very careful of renting scams……never pay an application fee, I repeat, never pay an application or administrative fee, period. If you are in a rush and must, you are screwed anyways, but if you do have time, never pay an application fee period. I have the best credit you have ever seen, but apartment complexes have tons and tons of scams to keep you from getting any of the application fees back. The first scam is to show you a model apartment and then say “your unit is being cleaned, or prepped, or remodeled, LET”S SEE IF YOU ARE APPROVED FRIST.” They then get you to pay an application plus sometimes an administration fee. These can range from $17.50- too much money to write. They then get your lease ready after being approved. By this time you are getting ready to move, then on (or very, very close to) the move in date, they take you to see the prepped apartment. You are totally disappointed to find out that doors squeak, the location inside the complex is not exactly what you expected, plus many other things that they failed to mention on the tour of the model apartment. The particular unit I was scammed on had a light switch to turn the furnace on and off. Really, they failed to mention that in the model home. I thought that I was prepared and spent hours upon hours on how to avoid pitfalls during apartment hunting. These apartment complexes are figuring out new ways to scam consumers by the day. These are not things that you can read about online or even think about before they happen. A majority of these scams occur at apartment complexes offering specials, such as free rent, 1/2 off first month, etc. That is how they generate the walk ins. Most of the hoaxes occur at complexes that are lower budget in expensive areas. You know the some what shady but not so shady neighborhood down the street but in a nice area, but a not so nice area. There isn’t a murder but there is larceny and theft. But, then again there are million dollar homes right across the street, and down the street, and everywhere around the apartments. I hope i can create a visual picture. Anyways, back to the subject, these complexes make $100-$300 extra per day from people paying application fees and then changing their mind. It happened to me, they showed me the nice model but on my lease-signing a day before my move in date they placed me next to a HUGE DUMPSTER in the middle of the parking lot. Not a normal apartment dumpster, literally, a huge construction dumpster in the middle of the road right outside of my unit. It was taking up parking spaces and I could see it through the window. It was parked crooked. They also decided to put me in a unit that had no lights. I wanted to make sure I was making the right decision and drove by there at night. Every apartment building was lit up like a Christmas tree except for one, the one that I was about to move into. Those are deterrents that they strategically set up to hinder you from moving in. I did not know this would happen until it was to late to back out. I still backed out though, lost my application, administrative, and deposit and stayed in the apartment I was in. Wouldn’t you have? I then had to go to month to month and BE CAREFUL of month to month. After I couldn’t move into the dumpster I had to cancel the movers and stay where I was. Once this happens you AUTOMATICALLY go into month to month in your lease. Now you AUTOMATICALLY have to pay a heavily increased charge for an ENTIRE month. Not just for the one week extra, you are there, until you line up another place, for the entire month, or sign an increased lease. After that happened I tried to renegotiate my lease terms with the apartment I was residing. They quoted me some new rates and told me that I had one day to decide. That’s right, one day to decide whether I was staying for a year or paying an extra inflated rate month to month while I ponder. Since I wanted to move from that area because of a tremendously high crime rate but extremely expensive area, I asked for a 6 month lease rate, they offered the price and I said I wanted to the 12 month lease, to simplify things. I still had one day left so I said that I would sleep on it and come back tomorrow. After much debate, I changed my mine and decided to go with the 6 month lease. It wasn’t month to month which was moronic to pay but I could leave sooner than 12 months and it would give me enough time to find the right new place. I then go to the leasing office of my current apartment, not the dumpster, and tell them after crunching the numbers I would like to switch to the 6 month lease, they precede to tell me that the rate has GONE UP by $30 in one day due to fluctuating rental markets. I will stick a fluctuating rental market up their ass! Now, I have been scammed twice in less than two days. I just bite my tongue and sign the 6 month lease for an extremely expensive yet tremendously high crime rate area, once again. Some would say that I should have given myself more time to find a place. So let me tell you what happened 5 weeks before I had to move. This is before the dumpster apartment. I am well prepared for my move next month, I buy boxes and pack everything early and hire the movers 6 weeks in advance. I found a decent apartment in a slightly better area, I think. It was nice and cheaper than where I was. This is where scam #2 comes in. These apartment employees are happy to see us. I say us because I brought my girlfriend along to take a look at the apartment. Never hurts to get a second opinion, or does it? This complex takes me to see the model home and I like it and decide to move forward. They say the next step is credit approval. I have great credit and I am ready to go. The complex employee asks (listen carefully) ” Is your girlfriend going to be staying with you at your apartment?” I reply “sometimes, here and there.” She then states that all residents of the apartment must sign a credit application and pay an administration fee. I stated that my girlfriend would not be living there only staying there. Plus that I would be on the lease solely. She then stated that anyone and everyone that stays there and is over 18 must fill out and sign and application with an administrative fee. I figured I might as well go for it since I had been searching on Craigslist for over 3 months to find the right place and I wasn’t aware of the scams yet. We both then hand over the application fee MONEY ORDERS and applications. I do not have my guard up yet because this is the first place we are viewing. The story goes in reverse to prove a point. The next day I get a call stating that the complex needs my girlfriend to get an official social security card. Say what!! What does my girlfriend’s official social security card have to do with me getting an apartment. She then goes and gets one anyway and everything is back on track. The next day I receive a call stating that my girlfriend’s credit came back as high risk. Next thing I think is, what does that have to do with me signing a lease but they state that they cannot let me sign because of that reason. What is going on? Be warned, I figured out the common denominator in both of the situations. The apartment complexes would rather keep a model open and have people come view the model and pay the application fees then they set up time bombs that restrict or impair you from getting the place. This a different type of rant and one that many people do not see everyday. Once they get you in a lease there are a million rants and complaints, you can review these at apartmentratings.com. I have written many reviews on those sites and most of them are good and excellent reviews. This is because times are changing and these scams did not occur a few years ago. The rental market is the new housing market, the management companies call the shots and the renters get screwed. Some would say that homeowners get screwed more because of decreasing property values. I happen to think that it is a tie. If you are looking for housing, you are screwed, point blank, period. Let me tell you a story about when I went searching for a house. I used to work at a bar and everyone would tell me I need to get a house. It is the best investment. I was just leaving my parents house and getting out on my own. I lived with some friends and one of them was a mortgage broker. I then searched for a house and found a couple. I was not in any type of hurry. I was young and stupid and wish that I could go back in time. I liked a house decided to make the purchase, I told my friend about it and he said he could get me approved. I was approved, somehow, even though I exaggerated the truth. I was going to buy the house for $260,000. I then received the paper work, I didn’t care what it said and put $3000 down on the home. The realtor scammed me into thinking someone else was going to get the home if I didn’t. Who cares if they do, I should of thought, but I was young and decided I was cool and rich if I had a house. This was the time when the internet was going mainstream. I researched and researched and read article and article about how the housing bubble was going to pop. So I decided to back out of the deal. I then, get this, lost my $3000 down. No remorse for me, just lose the money, who cares about me. ESCROW MONEY is a fluke. It is the worst invention of the earth. It is the legal black market. I care about the people trying to sell the house but why should I pay their bills while they live there and the house isn’t even mine yet. But the money sometimes does not even go to the sellers, it goes to an escrow company. They only way to get it back is go to court and then the money disappears from both the buyer and seller and goes to attorneys. Refuse to ever pay escrow fees, even if you can’t buy the house and you absolutely love it. REFUSE, REFUSE, REFUSE. It will turn your daydream into a nightmare. Do not believe what anyone else tells you. Trust me. I promise you for ever and ever. I think escrow money is worse than an application fee. Do not EVER pay escrow fees either. Anyways, back to the story, I did not end up getting the house and now that I am older and times are tougher. There is no way I could of ended up affording that house payment, plus the house is only worth $190,000 plus the neighborhood has gone downhill, even after all my in depth research. Another thing is now when I read the mortgage contract that my friend gave to me, after 30 years of paying $2000 a month I would of only owned 25% of the house, the rest of the money would of went to interest, and at the end of the 30 years, I would owe another $200,000 just to pay the house off. Thanks a lot friend. The point of the story is housing SUCKS, it is as bad as the stock market and tags and titles. The scams have just moved from housing to rentals now. Craigslist is a swamp of scams and juke moves. Stay with your parents as long as possible and give them your money, do not read what these secret realtors write in these posts about moving out and not living with your parents. If housing goes up since the economy is officially zooming out of the recession (except for the national debt) than housing is great but be careful when your snake realtor and hornet of a mortgage broker tell you to hurry. By the way the city I live in is Sandy Springs in Atlanta, zip code 30350. Look up the crime and the prices of housing. Both as high as all these other crooked counties. The apartments that scammed me are Aspen Pointe in Roswell Ga 30076, they are the ones that made my girlfriend fill out an application form to stay with me. Parc at Dunwoody in Sandy Springs Ga 30350, they are the dark dumpster apartments that will not show you your actual apartment, until it is too late. I went to set up gas and cable and both companies told me somebody had already set up accounts for my new address. They told someone else they were moving in my unit at the same time as I was told. Wow, forgot that lovely point to add to the mischief. The apartment I am still in are Residenses at Morgan Falls, they are nice inside and I do not have much complain with them except for the rental rate fluctuation they pulled on me at the last minute. That I believe was the least deceitful and disrespectful scam out of all three of the apartment scams. In conclusion, give yourself plenty of time when searching for housing on always ask and say what you feel. These employees are trained to side track you and lie STRAIGHT to your face. Do not worry about getting anything in writing due to the fact you will only get screwed for $100’s or $1000’s of dollars and lawyers cost more than that.
I don’t know what to say… I backed out of buying a house with a $2000/mo house payment 5 years ago. I have since spent over $80,000 on rent and do not own any type of house or asset. I used to have a decent job back then but now I am unemployed. I can not figure out if I did the right thing by backing out and not purchasing the home. I lost $3000 in escrow money because I did not finalize the purchase contract, now the home is worth $60,000 less than when I would of purchased the home. Plus, now I look at the mortgage and I would of had to pay $2000/mo for 30 years and then I still would of only owned 50% of the home, itself, after fees and interest. After 30 years of $2000 a month I would then have to pay another $220,000 just to purchase the home outright. It seems to me that there is something wrong with all of these options. Not one of them is a smart investment. Now that I have rented I have paid only half of the amount (per month) of what the mortgage payment would have been for 5 years but I do not own anything. If I would of purchased the home, I could no longer pay the mortgage anyway and would have lost almost the amount I spent in rent in equity. If I would of stayed living with my parents I would have over $85,000 extra money in cash plus the amount I spent on bills. That is a lot of money for 5 years of living in the straight up ghetto. Plus, the house I almost purchased is now in the ghetto also, even after all my research. Some would say it is a very nice area but there is crime right down the street. Even if the housing market would have doubled in the last 5 years, after the commissions on selling and sneaky mortgage fine print I still do not think I could of profited. But, renting has many more negatives, application fees, lying apartment managers, fluctuating rates, 60 day notices. I could not buy a home now anyways, anywhere, because I am unemployed. I have been saving for a home and I have $500,000 to spend on a house but I cannot get a mortgage and I would be stupid to put all of my money in one home. Any type of housing is a no win situation, there is not a good choice out there.
Logan,
I appreciate all the knowledge you share with us.
Thank You,
Santa Rosa, Ca
3.5 percent down payment means almost permanent mortgage insurance now as well. And young people do not think buying and driving miles to a new job is worth it. They choose to be nimble. And well they should.