Feeling pressure to buy a home? Resist!

The homeownership rate is at record lows–but that may be a blessing in disguise for young workers and many others who need flexibility in their careers to get ahead.

Too many people bought homes at the peak of the housing boom a decade ago, leading to a foreclosure epidemic when it turned out many couldn’t afford the mortgages. The pendulum has now most likely swung too far back the other way, and the adjustment isn’t over. “We think it will get worse before it gets better,” Ralph McLaughlin, chief economist of online real-estate firm Trulia, explains in the video above. “Eighteen-to-34-year-olds are the largest share of the population, and they just don’t own homes at the rate older people do.”  

Young people face many difficulties trying to buy a home these days. In many markets, there’s a shortage of starter homes, which has pushed prices beyond what first-time buyers can’t afford. Banks, meanwhile, are pickier about whom they lend money to than they were before the 2008 financial crisis. And a heavy student-debt burden for some young workers leaves little left to save for a down payment. 

But a lot of young people might be better off renting than buying, even if they feel they’re not living up to the standards of their parents’ generation. “Take a deep look at your personal circumstances,” McLaughlin advises. “If you’re a little uncertain whether you might move someplace else, or your parents or family live someplace else and you might need to take care of them, it’s probably a good idea to rent.” 

McLaughlin says he himself made the mistake of buying his first home when he was 29 years old—six months before getting another opportunity that required him to move. Even if a seller can unload a house for the same price he paid just a few months earlier, he’ll typically lose thousands in closing costs, agency fees and other one-time expenses. 

Workers today need to be more flexible than in decades past, since many companies operate all over the world and technology can rapidly disrupt industries that seem stable. Housing experts typically say it’s a good idea to buy if you’re pretty sure you won’t be going anywhere for 7 to 10 years. But given the pace of change today, fewer and fewer people can look that far into the future with reasonable certainty. 

Some things remain the same, though. As young people get married and have kids, they need more space and homes in good school districts—which are often in the suburbs, where the only real option is to buy. “Millennials are not getting married at the rate their parents did, or they’re getting married later,” McLaughlin says. “But we do know they want to own a home eventually. They’re just not in the personal situation to do it right at this moment.” There’s nothing at all wrong with that.

 Courtesy: Rick Newman. His latest book is Liberty for All: A Manifesto for Reclaiming Financial and Political Freedom.