collage of money, charts, student working and graduating

Home “Sweat” Home

Robert O. Weagley, Ph.D., CFP®

This past weekend I, finally, had a weekend where I could stay home and get some work done on my yard. Then, it rained all day on Saturday. Sunday, the grass dried and, by mid-day, I could plant seedlings in my garden, while relishing in the sticky Missouri clay covering my hands; mowed the yard; and performed other assorted tasks on my quest for nirvana through the art form I call Zen and the Art of Weed Pulling. (Seriously, I try to put myself into a state of consciousness where, when I pull weeds, I stretch my 63 year old muscles while mindfully pulling each young intruder in the attempt to remove all evidence of its existence on my part of our planet. While I am seldom successful, I am delighted to report that others share this illusion. Check out this article in the Washington Post: http://www.washingtonpost.com/local/zen-and-the-art-of-weeding/2013/05/12/b780c600-b97c-11e2-92f3-f291801936b8_story.html )

While I suppose this is therapeutic (most of my friends know that I need to find the time for therapy), my children never shared my passion for yard work. That is, unless they were having their friends over for a party and then, they encouraged me to find time to get ‘er done. Little did I know that my millennial children were simply demonstrating traits of their generation. Millennials tend to be liberal in political ideologies, supporting gay marriage and legalization of cannabis; less likely to practice organized religion; more likely to be unemployed; and more likely to return to their parents’ home to live. Moreover, in the aftermath of the Great Recession, they are less likely to be home owners and to continue to rent their housing. Why?

For most people, buying a home requires one to borrow money. Besides witnessing the problems of homeowners during the recession, young people have average student loan debt of nearly $30,000 in 2012, growing from $18,650 eight years earlier. Studies of the cost of renting compared to buying consistently find that owning is less expensive. Yet, these studies often only compare the cash flow of paying rent versus mortgage payments, while neglecting home purchase costs such as a down payment, closing costs, and higher interest rates charged to purchasers with substantial existing debts, such as a student loan and credit cards. The net worth of millennials may be holding them back, while they rent to become financially prepared to own. Although surveys show that the percentage of millennials who say this is the reason for renting has been falling, the issue of dollars is always key to decisions of a relatively large magnitude. This may be especially true for the generation who witnessed the mass foreclosures of recent years. Looking past the money, what is driving this trend?

For one, every generation likes to spend time with others like them. Urban, apartment living provides entertainment, restaurants, concerts, civic events, and nightlife. Often, smaller studio apartments may be rented with the amenities being shared with other tenants. Movie rooms, exercise equipment, social recreation rooms with ping-pong and pool tables, a swimming pool, a sharing library, electric car charging ports, as well as other life enhancers are often available to renters in newer complexes in redeveloped urban areas.

When millennial renters begin to have children and consider the suburbs for their children’s socialization, they may still rent until they get to know their new community and their habits within the community. If they don’t like where they are, renting provides the flexibility to move. The flexibility to move is key to this group. The Bureau of Labor Statistics reports that they tend to change jobs three times more often than those older. It is clear that renting makes it that much easier to “move on up” should the opportunity arise.

While it is generally assumed that a neighborhood of home owners is more stable and safe, it is also true that, if one is blessed with a bad neighbor, a renter only has to put up with it until the lease expires. With homeownership, one may have to wait until the neighbor, or you, die. You just never know when the American dream becomes the nightmare on Elm Street.

Finally, if you don’t own your home you likely do not have to sweat while cleaning the gutters, mowing the lawn, or gardening. Moreover, you do not have to pay for repairs, upgrades, and the inevitable furniture that must be purchased to fill the rooms. Renting keeps these items out of your budget, giving you more resources for that coveted trip to Chile, like my millennial colleague took over Christmas. On the other hand, you won’t be able to build the equity from homeownership, develop lifelong friends for your children and yourself that follow from a stable neighborhood, and, perhaps, you just might find that homeownership completes your picture of financial success. Or, it just might be the case that you discover that you revel in the Zen of pulling weeds, while sweating around your home, sweet home.