Struggling to Save for a House? This Could Be Why
We all know that overspending on avocado toast is the REAL reason millennials can’t afford houses (*cough, cough…*), but a recent Reuters poll has revealed that house prices in the US are on track to rise at double the rate of inflation and pay, spelling more bad news for millennials who are looking to settle down soon. Stagnant wage growth has already negatively affected millennials’ financial futures, impeding their abilities to save for retirement (and even for day-to-day unforeseen circumstances), so it’s sadly just another symptom of issues this generation is already all too familiar with.
The Reuters poll also notes that “an acute shortage of affordable homes in the United States” is putting the kibosh on home-buying plans too. While millennials may move to cities seeking higher salaries as well as access to public transportation, nightlife, and other amenities, the housing prices often lock many potential ownership prospects out. As a result, they may compromise with ever-lengthening commutes from more affordable locations or settle for a lower salary in a more accessible neighboring town.
So what exactly does this mean for people looking to buy in the next few years? The poll predicts that “U.S. house prices [will] rise 4.3 percent next year and 3.6 percent in 2020,” leading to an even bigger gap between individual earnings and house prices. And it’s not an anomaly, but a trend. “We are not seeing a temporary phenomenon,” says Sal Guatieri, senior economist at BMO Financial Group. “House prices have been outrunning family incomes for several years in the US, and while demand has cooled off a bit, the supply side is still very tight.” (To put it another way, it’s not your imagination that you can’t find a place within your budget.)
So it looks like millennials may be renting for longer than they’d originally planned. And with rental prices across major US cities taking up a major cut of most salaries, that’s not exactly an appealing alternative. On the brighter side, many millennials are taking things into their own hands, opting to buy cheaper homes and spending their funds on remodeling instead. And while this is not ideal, it does provide another option to renting forever.
How does this change your home-buying plans? Let us know by mentioning @BritandCo.
(Photo via Getty)