There’s no doubt about it, the American dream has been redefined.
Once considered one of the fastest ways to build wealth and encourage financial responsibility, home ownership rates have been steadily declining for the past decade, falling to a rate of 64.4% just last month, which is the lowest it has been in nearly 19 years. Americans age 35 and younger — often referred to as millennials — whose home ownership rates are at a historic low at just 36%, have taken a lot of criticism for their hesitation to buy (among other things). However, new research suggests they might be onto something after all.
According to a recently released report from HelloWallet, a workforce optimization firm and research firm, nearly 40 million households, which is more than half of current homeowners, would actually be better off financially had they chosen to rent during the particular time period in which they purchased their homes.
The study focused on 20 U.S. cities, and examined various factors such as home appreciation and the the cost of renting as opposed to buying a comparable home, often referred to as the rent-to-price ratio, which now stands at about 5% nationally. The report concluded that prospective homeowners, earning an annual salary of about $50,000, could generate more than 50% in additional wealth simply by renting and investing in stock options over the next decade instead of purchasing a home.
It’s as though millennials have a choice in the rent vs. own debate. Millennials often choose to rent a luxury apartments out of sheer necessity. Crushed by student loan debt — with most loans being in default — in addition to poor credit scores and low-paying jobs relative to their educational background, renting new luxury apartments is their only option.
Often referred to as the “Boomerang generation” due to the fact that many millennials moved out of their parents’ homes only to come back in order to make ends meet, millennials who lived with their parents for some time are now ready to venture out on their own. While living with their parents, they were able to create nest eggs, which has allowed them to rent a luxury apartment once they spread their wings.
For many millennials, the decision to rent a loft apartment isn’t much of a decision at all. With affordable rental rates and flexible leasing options which allow millennials the ability to relocate in order to purse job opportunities, lofts and apartments for rent are the only option.
However, millennials are the only ones who choose to rent a luxury apartment. Many young families and baby boomers still who were displaced from their homes due to foreclosure during the Great Recession, have found they they prefer renting luxury cit apartments over owning a home in the suburbs overall. The ease, convenience, and cost of renting is tempting, especially for those who are still wary of the housing market.