Millennials accounted for the largest share of home sales last year, with 24- to 35-year-olds making up a full quarter of all homebuyers. Another 20% of buyers were 35 to 44 (older Millennials and younger Gen Xers). But will the next up-and-coming generation of Gen Zers follow in their footsteps? Recent data seems to suggest so.
Furthermore, economists expect Gen Zers to have a higher homeownership rate when they’re age 35 to 44 than Millennials did at the same age. Still, the renting versus buying debate is never clear-cut despite where current trends seem to point. There are pros and cons for both situations. The right choice depends on your budget, location, long-term plans, and many other factors.
The Pros and Cons of Renting a Home
One of the biggest advantages of renting is that you don’t have as much financial responsibility to your home as a homeowner would.
Renting is a more flexible option for moving, too. If your job changes or you simply want to move to a new place, it’s just a matter of putting in notice with your landlord.
Renting isn’t without its faults:
- You have to deal with a landlord
- You may have to live in close proximity to your neighbors
- Usually, you can’t make any updates or customizations to your property
According to Apartment Guide’s 2020 Annual Rent Report, the average monthly rent for a two-bedroom apartment in 2019 was $1,808.70. Over the course of a one-year lease, your rent payments would total $21,704.40.
The Pros and Cons of Buying a Home
There are some big benefits to buying a home, too. For one, you build equity. You can use that equity later with a home equity loan, HELOC, or just in cold, hard cash when you’re ready to sell the house.
Owning your home creates peace of mind and pride. It’s all yours, there’s no landlord you answer to and you can truly make the place your own.
Owning a home comes with significant up-front and ongoing costs.
- Average yearly home maintenance/improvement spending: $1,521
- Average closing costs in 2018: $5,779
- Average down payment in 2018: $15,490
If you want to move or your job changes, it might not be as easy to pick up and leave as it would if you rented.
Making Your Decision to Rent or Buy
Your location will play a big role in the rent-vs.-buy debate.
In addition to location, finances play a role in your buying-versus-renting decision, too
With the average down payment and closing costs totaling more than $25,000, homebuying’s financial demands are high. If you choose to buy a home instead of renting, make sure your finances are prepared for the up-front costs.
The Bottom Line
It’s clear there are arguments for both renting and buying. Recent trends do point toward a higher interest in homeownership among younger generations. Future trends indicate Gen Z homeownership rates will outpace Millennials.
However, trends shouldn’t dictate your choice. The buying-versus-renting decision is a very personal one. It’s one you should make with careful thought and consideration of your finances, goals, and needs as a household.