Is Suburbia Dying Out?
There was a time when living in suburbia was the American dream. White picket fences, wide-open backyards for the kids and pets to play and a short bike ride to the local school.
However, recently, the American dream has begun changing. Minneapolis recently struck single-family zoning in order to create more affordable housing, according to Bloomberg Businessweek. This action makes it easier for developers to build multi-family properties without dealing with local opposition.
Multi-Family housing developments serve as rental opportunities, which are becoming increasingly profitable. According to a study from Berkeley, millennials are priced out of homeownership because of their student debt and it's hurting housing markets in New York, San Francisco and San Jose. More so, according to LinkedIn's trending stories, Oregon, North Carolina and California are looking to outlaw single-family housing altogether.
So, what's causing the shift away from the white-picket-fence fantasy?
Apparently, student debt is the root cause.
Student Loan Debt
According to Value Penguin, the average student loan debt is $32,700 and the median student loan debt is $17,000. Whereas the down payment on a median home in the United States ranges from $6,804 to $45,360, depending on whether you get an FHA loan or a conventional loan.
For the average millennial with student loan debt to purchase a home, they need to come up with about $6,804, while making monthly payments on about $17,000 worth of student loan payments. Then, they have to convince a mortgage lender to approve them for an additional $220,000 in debt. The whole endeavor is a mission. It makes sense that homebuyers are feeling discouraged.
Should You Give Up on the American Dream?
Buying a home as a young person right now is rough. But it's worth it.
The average monthly rent in the United States is about $1,012, according to the Department of Numbers. That's a similar payment to what you would make on a 30-year mortgage at a 4.5% interest rate on the median cost of a home (i.e. $1114).
The main difference? Once 30 years have passed, you don't need to pay any further.
So, how do you make it happen if you've still got all the student loan debt? Consider renting to own. It will help you enjoy some of the benefits of being in a permanent home sooner than renting does. It also sets you up to start working on a home purchase and motivates you to keep moving forward with three years of wiggle room to make it happen.