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Why Millennials aren’t buying cars or houses & what that means for the economy

Home Forums General Columbus Discussion Why Millennials aren’t buying cars or houses & what that means for the economy

Viewing 15 posts - 31 through 45 (of 211 total)
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  • #511816

    I am genuinely curious. I wonder if millenials without kids can move around more because they have a tribe in social media. I’m not sure if young children can do that without experiencing face-to-face long term friendships first, tho. I don’t know.

    #511817

    GCrites80s
    Participant

    CbusIslander said:
    Yes, I know the current upticks maybe temperary, but right now it is cheaper to purchase then rent. This generation is having no problems dropping 1200/month plus in rent with no return.

    Umm, what about upkeep, property taxes, insurance, interest and inflation? Primary residences are rarely investments with significant returns without a lot of sweat equity or rapid fundamental changes in the neighborhood once those factors listed above are figured in.

    Not saying don’t buy a house — but I am saying a primary residence is just a place to live, not an investment in and of itself. But we’ve been over this like a million times here. Houses can be used to leverage other investments, though.

    #511818

    drew
    Participant

    GCrites80s said:
    Umm, what about upkeep, property taxes, insurance, interest and inflation? Primary residences are rarely investments with significant returns without a lot of sweat equity or rapid fundamental changes in the neighborhood once those factors listed above are figured in.

    Not saying don’t buy a house — but I am saying a primary residence is just a place to live, not an investment in and of itself. But we’ve been over this like a million times here. Houses can be used to leverage other investments, though.

    Even if a house is not necessarily a great investment, it’s a legitimate vehicle for saving… certainly relative to paying more than the equivalent of a mortgage payment per month in rent. Returns, in the investment sense, are far from guaranteed, but equity only comes through purchasing.

    From a strict financial perspective, when rents are as high as they are in Columbus (and real estate as low as it is here) buying is the way to go.

    Of course, the decision making isn’t solely a function of finance… and that’s where the whole phenomenon gets interesting.

    #511819

    GCrites80s
    Participant

    The liquidity of being able to move away quickly is part of the reason rents can become elevated in a city with as transient of a population as Columbus.

    Think about money market mutual funds. They offer really crappy returns as opposed to other instruments yet there is still plenty of demand for them due to their liquidity.

    #511820

    gramarye
    Participant

    drew said:

    Umm, what about upkeep, property taxes, insurance, interest and inflation? Primary residences are rarely investments with significant returns without a lot of sweat equity or rapid fundamental changes in the neighborhood once those factors listed above are figured in.

    Even if a house is not necessarily a great investment, it’s a legitimate vehicle for saving… certainly relative to paying more than the equivalent of a mortgage payment per month in rent. Returns, in the investment sense, are far from guaranteed, but equity only comes through purchasing.

    I think the reasons GCrites gave are the reasons why it isn’t a legitimate vehicle for saving.

    Subsumed within my rent are property taxes, insurance, upkeep, condo fees (common area maintenance, landscaping, etc.), water, sewer, trash, and any interest I’d be paying on a loan for a similar property. Back all of that out and the amount that I actually pay the property manager that it gets to keep is not that high. For that price, I get (i) the freedom to leave without the hassle and expense of selling a house, and (ii) on-site maintenance and repair services (meaning that when our hot water tank broke last week, we not only didn’t need to buy a new tank, we also didn’t need to pay anyone to install it–the landlord had its own people do that).

    Therefore, the opportunity cost (the amount of lost potential equity buildup) is minimal, and a small price to pay for being absolved of the risk of catastrophic maintenance emergencies that might well drive the total non-recoverable costs of ownership above renting. Am I missing that much by forfeiting the chance to trickle a little bit of money into an illiquid, volatile asset with high costs of entry, upkeep, and exit (e.g., broker commissions)?

    Of course, the decision making isn’t solely a function of finance… and that’s where the whole phenomenon gets interesting.

    It’s not solely a function of finance, but the financial arguments still matter. If houses really were appreciating at 10% in inflation-adjusted dollars annually, I’d be inclined to buy a house regardless of my cultural proclivities.

    #511821

    peter
    Participant

    gramarye – NAILED IT.

    #511822
    derm
    derm
    Participant

    Walker said:
    +1

    This is already very true with media these days. Many young people would rather pay a subscription price to access music/tv/movie content from any device at any time rather than buying and owning physical media to listen to a cd or watch a dvd.

    Why own a car when you can lease/rent and still have the same type of access?

    Why own a home when you can lease/rent and still have the same type of access?

    Sort of. The music analogy is about outdated technology. I am not a millenial but I dont buy CD’s or DVD’s anymore because that is an old modality. I dont think it is an ownership issue as much as pragmatism. I bought records, then tapes, then CD’s, now I use a digital file.

    Young people have never been the initial housing target. Takes a down payment, long term credit and a commitment to a spot, usually because of a job or children. Happens more when you are older. Demographics have people spending more at 45 than 25. Has always been like this. This is not some new phenomenon. The only thing different this time is the economy. You cant even relate it effectively to the Great Depression era economy as that was more agrarian.

    About houses and cars, you dont have the same access. I dont have anyone who can walk into my house with 24 hours notice or tell me I cant live there next year. My truck is mine until I say it is not. It is different access for both of them, some parts better, some worse.

    I leased cars when I was younger and live in apartments and rentals.

    #511823
    derm
    derm
    Participant

    gramarye said:
    I think the reasons GCrites gave are the reasons why it isn’t a legitimate vehicle for saving.

    Subsumed within my rent are property taxes, insurance, upkeep, condo fees (common area maintenance, landscaping, etc.), water, sewer, trash, and any interest I’d be paying on a loan for a similar property. Back all of that out and the amount that I actually pay the property manager that it gets to keep is not that high. For that price, I get (i) the freedom to leave without the hassle and expense of selling a house, and (ii) on-site maintenance and repair services (meaning that when our hot water tank broke last week, we not only didn’t need to buy a new tank, we also didn’t need to pay anyone to install it–the landlord had its own people do that).

    Therefore, the opportunity cost (the amount of lost potential equity buildup) is minimal, and a small price to pay for being absolved of the risk of catastrophic maintenance emergencies that might well drive the total non-recoverable costs of ownership above renting. Am I missing that much by forfeiting the chance to trickle a little bit of money into an illiquid, volatile asset with high costs of entry, upkeep, and exit (e.g., broker commissions)?

    It’s not solely a function of finance, but the financial arguments still matter. If houses really were appreciating at 10% in inflation-adjusted dollars annually, I’d be inclined to buy a house regardless of my cultural proclivities.

    Part of that is a product of the times. We are in the one of the most volatile periods of the American Housing Industry, it is easy to say that. It has not always been so. Right now I would not buy a house. I think they are going to drop more. Renting is probably smarter right now, rising rent prices are reflecting that. You cant find a rental in Grandview. If you found one you would overpay compared to other places. Will that always be the case, nope, at some point it will not be. Depends on the situation.

    Your calculations have also left out an extremely important variable. Time. You will be paying rent FOREVER. My principal payment will never go up. Your rent will go up Forever. My principal is targeted to be paid off in six years. Then I have no rent, only taxes, maint and utils. Way less than rent. Does not matter if my house loses value, still a roof over my head as long as I want it.

    #511824

    peter
    Participant

    I think they are going to drop more.

    Care to make a friendly wager on that? Franklin County average selling price for the month of August, 2012. Will it ever go lower again? I don’t think so. Bet ya a beer.

    #511825

    GCrites80s
    Participant

    It’s going to be very location-specific, but the losses on all that cheaply made sprawl from the past 20 years is probably still going to outpace the gains seen in more traditional settings for a while.

    #511826
    derm
    derm
    Participant

    peter said:
    I think they are going to drop more.

    Care to make a friendly wager on that? Franklin County average selling price for the month of August, 2012. Will it ever go lower again? I don’t think so. Bet ya a beer.

    Deal pending time frame. When does the comparison period go to. Next year this time? Or are you really saying ever? I drink Bud so it is a low risk for you. I do like the Zauber wheat beer tho, how about we bet the Zauber of our choice?

    #511827

    AmyArt21
    Participant

    I can tell you why I don’t own a house.
    I’m not married and I don’t live with my significant other. I don’t have the money for an appropriate down payment, despite having zero debts. I’ve been out of school and working a full-time job and an additional part-time job since the fall of 2005.

    I was toying with the idea of purchasing a home about a year and a half ago. When I crunched the numbers, I discovered that I could probably find a property that was cute & well-kept for less than what I was shelling out each month for rent.
    But then, the hidden costs of home ownership started creeping up on me. Taxes, insurance. Then the water heater explodes. Then something happens with the roof. If I used my small amount of savings towards a down payment, I would have no cushion left for emergencies. And that was what scared me.

    #511828
    Walker Evans
    Walker Evans
    Keymaster

    chrisgillespie said:
    I am genuinely curious. I wonder if millenials without kids can move around more because they have a tribe in social media. I’m not sure if young children can do that without experiencing face-to-face long term friendships first, tho. I don’t know.

    I grew up in a neighborhood in Marysville that didn’t have a whole lot of kids in it. Both neighbors on each side of our house were older/retired. But we had friends at school and play dates, sleep overs and other activities kept us in constant communication with those friends, regardless of what part of town they live in.

    Our children now are pretty much in the same situation. Their friends may not live right next door, but they see them often enough, regardless of where they live.

    #511829
    Walker Evans
    Walker Evans
    Keymaster

    derm said:
    Sort of. The music analogy is about outdated technology. I am not a millenial but I dont buy CD’s or DVD’s anymore because that is an old modality. I dont think it is an ownership issue as much as pragmatism. I bought records, then tapes, then CD’s, now I use a digital file.

    I’m not really talking about just the switch from physical media to digital files (which are also quickly becoming outdated), but the switch from owning any kind of media (even digital) to paying a subscription to access a much larger library of content without actually owning it.

    You can subscribe to spotify or for access to music that you won’t ever actually own.

    You can subscribe to Hulu Plus or Netflix for access to tv shows or movies that you won’t ever actually own.

    This is the model that is becoming the new norm for the incoming generation.

    #511830

    Twixlen
    Participant

    I think there will always be people for whom renting works better, and always be people who desire to own. Right now, with the upheaval in the housing market, and the sudden exposure of the risk that can be involved, some are chosing to continue to rent. I think it’s cyclical – that pendulum will swing back toward the place we were before the bubble & ridiculously easy access to money.

Viewing 15 posts - 31 through 45 (of 211 total)

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