By Sarah Jones
I’m a member of the Millennial generation, I’m a Houston REALTOR® and a renter.
What if the next disruption in real estate is not a new technology? What if the next disruption is instead a generation — one that does not value home ownership the way prior generations have. The real estate industry will tell you that Millennials have thus far delayed home ownership. Perhaps “delayed” is not the right word, and instead Millennials are forgoing home ownership for other reasons.
You’ve probably heard plenty about student loan debt as a key reason Millennials aren’t buying. Is that the case for some? Sure. But what I hear way more often are reasons of flexibility and convenience. Here are a few examples from my personal sphere: Who wants to be tied down to a house? What if I get an awesome job and need to move quickly? I like to keep my options open and a thirty year mortgage doesn’t really feel like keeping my options open. Perhaps Millennials view home ownership in the same way they view marriage – many are disenchanted with what they perceive to be an outdated tradition.
Others too see renting as the best way to maximize lifestyle. For me personally, I’m a huge fan of high rises – lock and leave convenience, zero maintenance headache, built-in community with my 120 neighbors, and easy access to the amenities I want. In Houston, the best high rises, those in the best locations, are all rental buildings. I live within walking distance of work, cafes, a neighborhood pub, shops and restaurants. This is my definition of the best way to live – right in the middle of the life I want. Instead of buying a house in the burbs and spending hours in traffic, I get to spend more time with my family and community.
The old (and tired) argument is that buying a house is the smart financial choice for everyone; that buying is the holy grail of investing and renting is the same as throwing money down the drain. I disagree. Rather than tie up money in a home, I choose to reinvest in my business, a profitable venture that has created jobs for other people. It’s not just the downpayment consideration, but the ability to take on debt for other things should the need arise.
What about the mortgage interest deduction? The deduction does not necessarily make up for the huge amount of interest a home owner pays over the life of the loan. For a $250,000 mortgage at 4%, a home owner would pay nearly $179,674 in interest over the life of the loan. That’s an average of $5,989 per year. For someone in the 25% tax bracket, the deduction savings would be just under $1,500 a year on average. This seems like a case of spending money to save money…. my mom used to buy things she didn’t need just because they were on sale, and that never made sense to me either.
Also, keep in mind that it’s a deduction only available to those who itemize versus taking the standard deduction. Just because the deduction exists today does not mean it will be around for the long haul. The deduction is increasingly the topic of political conversations and there is no guarantee it won’t be on the political chopping block in the future.
Lastly, Millennals aren’t really a generation defined by our possessions. We don’t look around and define success by who owns the biggest house with the best car in the driveway. The people we admire most are those who write their own story and live life as an adventure. Many of us want to live with less and find a way to give more. Keeping up with the Joneses? Boring.
For Millennials, home ownership is no longer the heart of the American Dream. And that sure seems like a disruption to me.
Sarah Jones is co-founder and CEO of Bamboo Realty, Inc. in Houston.