It’s a known fact that values change from a generation to the next, one of the values that drastically changed in millennials’ minds is the measure of success in life.
While past generations perceived owning property or a car as the ultimate success story, millennials have other ideas. They have almost no interest in making huge purchases. They’re known as the generation of renters because they very rarely buy houses.
We will distinguish between two categories of reasons why millennials rarely buy expensive things, the first category is their values and the second is the financial constrictions they face.
Let’s dive into some of the reasons for this lack of interest.
1. Changing values:
1.1.The values are not the same
Success is measured differently by millennials, they prefer experiencing new adventures, traveling is the best achievement they can aspire to, they work hard to have the financial independence that will make it possible for them to live their dreams.
Also, young people have no interest in putting roots somewhere permanent, they love freedom and will strive for a job with a flexible schedule to allow them to travel to their heart’s content.
1.2.Material things have no place in their life
As we said before, millennials have no interest in huge purchases like houses and cars, they much rather spend their time and money traveling and enjoying their youth.
Making big purchases will only tie them down and take away their freedom. Instead of buying a house, they prefer paying rent because it will allow them to move freely when the whim takes them or when they change jobs which they tend to do a lot.
1.3. Getting into a state of well being
Most people think happiness and ownership of physical items are two faces of the same coin, the more they own the happier they will be. New psychological research and studies have concluded that it’s false, happiness and the sense of well being are achieved by spending time and money on experiences that bring joy and delight to the person.
1.4. Making connections is a priority
Millennials are the best generation when it comes to connecting with others, they value friendships and meeting new people regularly.
When getting together with friends, going on and on about materials is not a very warming conversation subject, no one cares about why you recently changed your car or where you bought your house, traveling, on the other hand, is an amazing way to share stories, the bad and the good.
1.5. Why buy worry
As with all possessions, owning something can cause unnecessary worry, the more expensive the item is the worst it gets. Houses can get vandalized and cars can be destroyed or stolen, but a traveling experience is not something that anyone can take away from you, you will have the memory to cherish and tell stories about forever.
1.6. Not having a partner
Purchasing a home is not a top priority when it comes to young people without children. The millennial generation delays getting married and having kids, this, in turn, pushes purchasing a home away from the mind as a non-urgent matter that can wait a few years more.
2. Financial limitations
2.1. They simply can’t afford to
Over recent years, real estate prices have skyrocketed, this means the affordability gap has widened between home values and income levels, yet, mortgage payment rules are still the same, if the payment exceeds 25% of the gross income then the person is denied approval because they can’t afford to buy and therefore labeled as a risky buyer.
2.2. Student loans burden
Most college grads have a student loan that they need to pay off after graduating, it takes them years to pay all of it off, this is one of the reasons they delay buying a house since their finances are strained with the loan, they need to make room for one more payment to be able to make that big of a purchase.
2.3. Banks are tightening the standards of lending
To reduce risks related to lending, bankers imposed more limitations which made it harder for millennials to accumulate the necessary down payment needed to acquire a home.
Some offers may make it easier to purchase a house without a huge down payment, but they have extremely high-interest rates to compensate for the risk. They also make a mandatory provision to get insurance for the entire loan, this adds to the monthly payment making it much more expensive.
2.4. Depreciation is real
The previous generations did not have as many opportunities to own a business as millennials do, so they considered buying a house or car a big investment.
While at one point it was valid reasoning, seeing how recent events and economic crisis impacted real estate, that belief is no longer viable. It can become a huge money sink in a few years, where landlords keep throwing good money after bad money.
2.5. City lights appeal
Some areas are still relatively affordable, but millennials are well known for their love for the big city lights, they rarely relocate and find a better job in places they can afford. They prefer renting in cities where they have access to anything they need for the lifestyle they choose, they flock to cities in large numbers driving renting prices through the roof, a tendency that shows no signs of slowing down anytime soon.
While most millennials opt not to make huge purchases, some are confronted with financial limitations when they do decide to acquire a home. One of the best ways to counter those limitations is to settle down somewhere affordable, with accessible real estate market prices. However, not many young people are willing to make the sacrifice of getting away from the city that offers them all the entertainment and adventures they seek.