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Should Millennial Parents Buy a Home?

young adults buying home

For many people, their home represents their biggest investment. It’s traditionally been the way of growing middle-class wealth. However, fewer and fewer people today are taking the plunge into ownership. Less than 50% of millennials currently own real property.

Why do so few members of this generation own the place where they live? Homeownership has lost none of its advantages — and gained quite a few over the years. Should millennial parents buy a home? In most cases, the answer is yes.

Why Homeownership Is Decreasing

In 1981, 35-year-olds were 20% more likely to own their homes than those of the same age in 2016. What’s the reason for the decline in homeownership?

Much of the problem lies with wage stagnation. The average family had nearly $18,000 less in annual income when adjusted for costs in 2007 than in 1979. Jobs still pay more or less what they did back in the 1970s, but houses cost much more.

The average house cost less than $50,000 in 1980. These days, you can’t even buy a manufactured home for that price in many parts of the country. Today, you’d shell out close to $200,000 for an equivalent property, more, depending on location.

Much of the decline in homeownership, therefore, breaks down to simple math. Jobs don’t pay enough, and housing costs too much.

The Problems and Uncertainty of Renting

However, the changing housing market hasn’t made renting more appealing. If anything, it’s less so. In many locations, property owners looking to make more money raise rents year after year — and tenants see zero return on their investment.

That’s if they can afford to keep housing at all. One little-discussed scenario in the housing crisis is how much it costs to move if your landlord raises rent to unaffordable levels or otherwise disposes of the property. Suddenly, the money you’ve saved toward a downpayment gets applied to a rental van — leaving you further behind when you have to start over renting elsewhere.

Unique Advantages of Home Ownership for Parents

Given that grim reality, millennial homeownership may seem out of reach for many. However, buying real property is probably one of the wisest financial decisions you can make if you have the means to do so.

The advantages of homeownership go beyond less chaos for your kids if your landlord raises rent or sells. Owning your home means never having to switch schools mid-semester on someone else’s whim. You’ll also enjoy the following perks as a parent.

1. Help Paying for College

How do you plan to pay for your kid’s school? You could leave your children with an undue debt burden if you rely on student loans, many of which have an interest rate of around 8%. Conversely, you can find much better refinancing options for lower, saving thousands over the life of the loan and setting your little one up in a better position to become homeowners themselves.

2. Leave an Inheritance for Your Children

Your children may not have to buy a home at all if you leave them the family property. Even if you only have one child, you should still leave a will, so they don’t have to go through a complicated probate process before taking ownership. However, current rules still allow you to pass on considerable assets free from a tax burden, including real property.

3. Take Advantage of Tax Breaks

Homeownership doesn’t only save your children tax money when you die. It also puts money in your wallet during your lifetime each time you file. You can deduct some of what you pay in state and local property taxes from your federal income tax. You may also take advantage of certain credits when you improve the property. For example, upgrading your appliances or switching to solar can net you a nice credit if you act before the current law expires in 2024.

4. Customization

While the Americans With Disabilities Act allows tenants to make material improvements to rental property to increase accessibility, their landlord can limit certain changes if doing so would render the home less livable to other prospective residents. For example, you might be allowed to install grab bars in the bathroom but not lower your countertop height if you use a wheelchair.

Additionally, homeownership allows you to paint and make improvements you simply enjoy, regardless of whether you need them for mobility. There’s no one to stop you from turning your bedroom ceiling into your personal Sistine Chapel if you don’t answer to a landlord.

5. Pets

Anyone who has ever had to surrender a beloved animal because their landlord said “no dogs allowed” knows that homeownership comes with shelter privileges. You don’t have to fill out a form getting permission — which is rather nice, considering you are an adult.

6. Get a Little Extra Wiggle Room

When your rent is due, it’s due. Many landlords apply late fees of up to $35 per day that you don’t make payment by the first. One shudders to think of the bills some tenants had come due in the wake of the current pandemic.

Conversely, a mortgage gives you a little wiggle room. True, you will take a ding on your credit history if you get in the habit of paying late. However, you won’t find an eviction notice on your door on May 6 when you first missed a payment on May 1.

Millennial Parents Should Buy a Home If They Can

The bottom line: owning real property is still one of the fastest ways to build wealth. Additionally, it comes with many advantages. Millennial parents should take advantage and buy a home if they can.