According to a new study in Housing Wire (March 26, 2018), Millennials will spend $100,000 on rent by the time they are 30 years old. The research indicates that rent consumes up to 45% of Millennial income today. With this generation spending nearly half of their income on rent without gaining equity, it may not just prolong their entry into the housing market, but it may also impact their long-term savings potential.
So, just how does homeownership help you build wealth? And why should Millennials seriously consider dropping rent and investing in property?
First, a mortgage payment is a type of forced savings account. With each payment, you are adding to your net worth by increasing the equity in your home. In comparison, your contribution toward rent is a sunk cost with no ability to grow equity in the future.
Secondly, as home prices increase, the equity in your home increases. In the latest Quarterly Pulsenomics Survey, the mean expectation for home price appreciation is over 18% over the next five years. This is good news for homeowners when you consider that a home purchased today for $100,000 will be worth $118,000 in five years.
While home buying certainly presents additional risk and responsibility, the reward can be much greater in the long run. Contact one of our loan advisors today to learn about the possibilities of homeownership.