Why Millennials are Renting Instead of Buying in Chicago
Buying homes is currently not on trend for those born between 1981-1996. This group is better known as Millennials and they have overtaken Baby Boomers as America’s largest generation. So what are millennials buying? The answer may shock you. We will dive into these questions and find out why millennials are renting instead of buying in Chicago.
Millennials Buying Homes
A new survey from ‘Apartment List’ analyzed millennial homeownership trends and found: 18% of millennials expect to rent forever, up from 12% in 2019 and 11% in 2018. Why do so many millennials expect to rent forever? There are three main factors holding millennials back from buying a home.
- An uncertain job market
- The rising cost of homeownership
Many millennials took out student loans to pay for college in an effort to secure a high paying career. Now, those millennials are on the hook for the student loan debt they took-on pursuing their higher education. As a result millennials who are in debt due to student loans and have had trouble making payments, do not qualify for mortgage loans. Conversely, a millennial who has been dutifully making their payments may easily take out a mortgage loan because they have good credit. But, they may be hesitant to take on even more debt because they know how difficult it is to pay-down.
An Uncertain Job Market
For a number of reasons many millennials are underemployed. Meaning, they do not have enough paid work. Or, they are not able to find work that makes full use of their skills and abilities. Underemployment leads Millennials to wonder, will I have to relocate to find a job in my field? Or, can I depend on my earning power remaining steady, if I take on mortgage debt? When it comes to millennials buying homes, these questions about the uncertainty of the current job market makes homeownership a nerve wracking decision.
The Rising Cost of Homeownership
When you factor in the rising cost of buying a home, the dream of millennials buying homes, feels far away. In Chicago, according to Credible, the average home currently costs $203,000. That price is a 6.7% increase from this time last year. Making buying a home a good investment. But, only for those who can afford to do so.
What Are Millennials Buying
What are millennials buying? It turns out the rental market is driven by millennials who recognize the value in renting furnished dwellings. Renting a furnished home is attractive to anyone who is exploring new opportunities. Moving can be as simple as finding a furnished rental online, paying your deposit then packing a suitcase. You do not need to worry about shipping all of your belongings across the country. You also have the freedom to pick up and move again, if needed.
Should Millennials Rent Or Buy In Chicago
There is good news for millennials living in Chicago. The cost to rent a home has been on the decline. While the price to buy a home is going up nationally, the cost to rent in Chicago is dropping. This makes renting a home an appealing option for millennials in the Chicagoland area. Consider, the average rental cost of a one bedroom apartment in Chicago’s top-ranking neighborhoods:
- Lincoln Park: $1,753
- Rogers Park: $1,150
- Edgewater: $1,350
- Lincoln Square: $1,200
- Buena Park: $1,350
- Old Town: $1,939
Now let’s compare the monthly rental costs with the price of homeownership in those hot Chicago areas. According to NerdWallet you should be prepared to cover these expenses when buying a home:
- The down payment
- Closing costs
- Mortgage payments
- Property taxes
- Homeowners insurance
- Mortgage insurance (If you did not provide a large enough down payment.)
- HOA or condo fees
Let’s imagine a millennial considering whether to rent or buy in Chicago. If you are buying a 1-bedroom condo you can expect to pay somewhere in this ballpark:
List Price: $265,000
- 1200 sqft
- Lincoln Park neighborhood
- A down payment of 20 percent: $53,000
- Closing cost of 5 percent: $13,250
- Mortgage payment: monthly estimate: $898
- Property tax: monthly estimate: $473
- Homeowners insurance: monthly estimate: $93
- HOA fess: monthly estimate: $675
- Utilities” monthly estimate: $125
- After saving enough for the estimated down-payment and closing costs you will pay: $66,250. Then, you can expect an ongoing monthly cost of $2,264. While the cost of renting a similar apartment in the same neighborhood is $1,753 plus utilities.
So is it better to rent or buy in Chicago? Considering the costs associated with buying a home, renting is a much better option for millennials. A number of financial advisors suggest paying off student loan debt before taking on additional debt to buy a home. Renting also gives you the flexibility to change careers and move to a new place to pursue your dreams. You do not have that kind of freedom when you own your home.
Real Estate Management Firms
Renting from a real estate management firm is a great move for millennials. A management firm is on-call 24/7 for their renters needs. This includes: maintenance, repairs, and security. Have a clogged drain? Just call your firm and it gets fixed.
On the other hand, homeowners are the ones who are on-call 24/7 for their own property maintenance, repairs and security issues. As a result, most homeowners end up hiring costly professional assistance. Unlike renting from a real estate management firm, there is no magic number to call when a property owner is in need.
When you consider the costs and responsibilities associated with homeownership, you can see why so many millennials expect to be lifelong renters. Luckly, renting property rather than buying offers its own set of advantages. Primarily, the ability to focus on pursuing career goals and increasing savings. Rather than sinking money into property management and upkeep.
Renting from a real estate management firm is highly recommended when searching for an apartment in Chicago. SRE Holdings manages a number of properties around Chicago. You can start working with them right away. Get in touch today to find the best rental option for your lifestyle and budget.