Buyers in Washington, D.C., have to wait the longest, at 4
½ years; in Dallas, buyers need only wait 1.3 years. Even in markets
with long time horizons, however, homebuying may not be the best choice
for younger Americans.
"Even with record-high rents in job
centers like San Jose, Boston and Washington D.C., putting off a home
purchase might be the best financial decision for a young person who has
saved enough for a down payment, depending on how long they intend to
stay in their jobs and homes," said Zillow's chief economist, Svenja
Gudell. "Young workers face a lot of hurdles on the way to
homeownership, including saving for a down payment in the first place
and deciding where and when to settle down."
Young workers are increasingly mobile today, which is why
so many continue to choose renting over buying. Millennials have the
lowest homeownership rate of any generation, as they are getting married
and having children later in life. These are the two primary drivers of
homeownership. Most surveys show that millennials say they do want to
own a home at some point, but they have largely stayed on the sidelines
of the housing recovery.
There is an increasing cry that a home is just not the best investment. "Shark Tank" host Kevin O'Leary has called housing a, "crappy investment," due to the expectation of rising interest rates and slower home-price growth.
In a popular post this week, George Mason University economist Alex Tabarrok also denounced homeownership on his blog "Marginal Revolution."
Housing is overrated as a financial investment. First, it's not good to have a significant share of your wealth locked into a single asset. Diversification is better and it's easier to diversify with stocks. Second, unless you are renting the basement, houses don't pay dividends. Stocks do. You can hope that your house will accumulate in value, but don't count on it. Indeed, you should expect that as an investment your house will appreciate less than does the stock market.
Home values have been rising steadily and are even accelerating their gains in some markets, but that is largely due to a lack of supply of homes for sale. A healthier scenario for rising prices would include rising incomes and a fast-improving economy; neither are the case currently.
Housing remains one of the most emotional investments there is. The vast majority of homebuyers today use 30-year fixed mortgages, even though they are unlikely to stay in the home 30 years. Adjustable-rate loans, even those with rates that are fixed for 10 years, fell out of favor after the housing crash, as buyers became ever more conservative.
Rents have been rising dramatically for the past few years, but younger Americans still choose to rent. That may be in part because of high student loan debt or the fact that high rents keep them from saving for a down payment; there is strong sentiment, however, in this generation that watched its parents go through the Great Recession, that buying a home is a risk not worth taking. Perhaps they will grow out of that, perhaps not.
There is an increasing cry that a home is just not the best investment. "Shark Tank" host Kevin O'Leary has called housing a, "crappy investment," due to the expectation of rising interest rates and slower home-price growth.
In a popular post this week, George Mason University economist Alex Tabarrok also denounced homeownership on his blog "Marginal Revolution."
Housing is overrated as a financial investment. First, it's not good to have a significant share of your wealth locked into a single asset. Diversification is better and it's easier to diversify with stocks. Second, unless you are renting the basement, houses don't pay dividends. Stocks do. You can hope that your house will accumulate in value, but don't count on it. Indeed, you should expect that as an investment your house will appreciate less than does the stock market.
Home values have been rising steadily and are even accelerating their gains in some markets, but that is largely due to a lack of supply of homes for sale. A healthier scenario for rising prices would include rising incomes and a fast-improving economy; neither are the case currently.
Housing remains one of the most emotional investments there is. The vast majority of homebuyers today use 30-year fixed mortgages, even though they are unlikely to stay in the home 30 years. Adjustable-rate loans, even those with rates that are fixed for 10 years, fell out of favor after the housing crash, as buyers became ever more conservative.
Rents have been rising dramatically for the past few years, but younger Americans still choose to rent. That may be in part because of high student loan debt or the fact that high rents keep them from saving for a down payment; there is strong sentiment, however, in this generation that watched its parents go through the Great Recession, that buying a home is a risk not worth taking. Perhaps they will grow out of that, perhaps not.
