To Rent Or To Buy? 6 In 10 Millennials Prefer Renting To Owning House

(REUTERS/Joshua Lott)A real estate sales sign sits outside of a house for sale in Phoenix, Arizona.

Nearly six in 10 millennials say they would rather rent than buy a house, a decision that may cost them over $700,000 in the long term, MarketWatch reported.

According to a survey by EliteDaily and Millennial Branding, the results of which were released recently, 59 percent chose renting over owning a house.

Only one in four said they were either very likely or completely likely to buy a house in the next five years, according to the poll which had 1,300 millennial respondents.

That's "bad news for the real estate industry," the report said.

This trend can be seen in data from the Demand Institute, which shows that currently only about one in four millennials owns a home, from about one in three in the mid-1970s and early 1980s.

One reason is that more than six in 10 feel that they simply cannot afford it. Another is that millennials tend to marry and have children later, as these two factors often cause purchases of houses, explained Dan Schawbel, the founder of Millennial Branding.

Millennials are also a generation that do not like feeling stuck in a single place, he said.

Daren Blomquist, vice president of RealtyTrac, said the decision to rent may be a costly one, considering that now is a good time to buy a house, if one plans on staying for at least five years, in many markets because of the very low interest rates.

"In most markets, it is still cheaper to buy than to rent [each month]" — even when you factor in the insurance and property tax payments, in addition to the mortgage payments," he said.

A median home in the U.S. costs $190,000. With annual home price appreciation at around three percent, a millennial who buys an average home today and pays $19,000 down with a 30-year fixed mortgage rate at 4 percent would own a house with $426,000-value in 2045. This is higher than the $373,000 in payment, including mortgage, taxes, and insurance.

"Plus, after 30 years, the person could live rent-free — a compelling prospect for retirement," wrote MarketWatch.

However, if the millennial chooses instead to pay this year a monthly rent of $1,312, the average fair market rent for a three-bedroom space nationwide, and his rent appreciates at 2.7 percent a year, he will end up paying almost $717,000 in rent over three decades, without owning an asset.

Waiting to buy a house is also costly as interest rates and median house prices are likely to increase. In a decade, a $190,000-average home would cost about $249,000 later.

If interest rates go back to their historical 5.6-percent norm, monthly payment for a $249,000-home would be $1,574, up by over 50 percent over the $1,037 house payment for a median priced home now.

Over those 30 years, the millennial would also have to pay $566,640 for a house worth $558,356 at the end of the period.

"In this scenario you wouldn't come out positive on your investment in the property until a year after the mortgage was paid off, in 2056 — at which point the home would have a projected value of $573,608," said Blomquist.

But Blomquist also warned: "If you can't afford it, don't buy."

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