Are Millennials obstinately ignoring the sage advice of their elders? Or are they more savvy than they are often credited?
Much has been made of the so-called Millennial generation’s distaste for all things ordinary, and for its perceived disinterest in following the path to “a good life” trod by previous generations. Even those wacky Boomers followed the same general pattern: they went to college and/or got a job, got married, bought a house, started a family, and continued to sell or buy when one of the aforementioned life events required it. Now they are selling again, downsizing to be closer to amenities – or their grandchildren, who live in the cities with their apartment-dwelling Millennial parents.
That is the line we were fed: that buying a house is part and parcel of being an adult and is one of the best financial decisions you can make. Except tell that to the millions of people who lost their homes in the most recent recession – clearly some bad choices were made there, on the parts of both borrowers and lenders.
A study earlier this year from the Federal Reserve Bank of St. Louis finds – surprise, surprise – that young adults now carry more debt than they did 25 years ago and have a lower net worth overall. Delay homeownership until you have a solid down payment and a nice nest egg to ride out emergencies and downturns, the Fed advises; mortgage payments are much less flexible than rent payments. Sure, you can sell if you need to downsize, but it takes a lot longer than breaking a lease on Beacon Hill and picking one up in Allston.
As it turns out, the conventional wisdom is sometimes wrong – or more generously, sometimes conventional wisdom is outpaced by circumstance. It was true for many years that buying a house was a sound financial investment, but that may no longer be the case. After a recession, lenders run away from what they ran towards, and it takes a while for everyone who was spooked to settle down. A housing crash like that of the Great Recession is unlikely to occur anytime soon, but to assume it will never happen again is wildly naïve. And yet, the sales numbers reported monthly by The Warren Group, publisher of Banker & Tradesman, continue to show a strong upward trend.
It all comes out in the wash; if buying makes sense for someone given their financial reality and life circumstances, and the prospective buyer has realistic expectations, it’s still a good choice, particularly in Massachusetts. If their life choices and financial realities don’t support buying, renting is a better bet.
Houses are milestones. They’re also millstones. So too are student loans, children, marriages and careers. Adulthood is hard no matter how you choose to do it. Millennials should not be shamed for choosing – or being forced by their circumstances – to postpone one of the biggest financial decisions of their lives.
