I was reading an article the other day called, "Why young people don't buy cars and apartments anymore", but really should have been called "Fuck the future, young people just want to have fun!"
The article has so much wrong about it, i'm not even sure where to start.
"Research shows that the so-called millennial generation, who are now 30-35 years old, rarely buy houses and even more rarely -- cars. "
Yes, this is because your generation is broke as a joke.
"Why own a car if you can take a cab? It's almost a personal car with a driver. And it's not more expensive than having your own car. Why buy a house in a beautiful place and go there for vacation, if you can find a place to stay through Airbnb in any corner of the planet? You don't have to overpay for rent or buy a property in a country you love. The same thing with real estate in your hometown:
- You don't know how long you'll stay where you live.
- You can take on a mortgage for 40 years, or you can accept the fact that you'll spend your whole life in a rented place.
- You'll probably change your job in the next few years. If you rent, nothing prevents you from moving closer to the office.
According to Forbes, modern young people change jobs every three years on average."
I actually agree with the idea of car ownership. I lived without a car for 8 years in Hoboken, and with public transportation, ease of rental cars and Uber - I completely agree you don't need cars in a walkable city. But clearly this was written by someone living in a metropolitan area. Try living in the suburbs without a car.
Since when are mortgages 40 years?! Rent vs Buy is based upon a lot of factors. Let me give you a good one for Hoboken/Jersey City. Lets call that "HJC".
Lets say you want to buy a 1 bedroom in HJC. It costs $425,000. You, being the smart millennial you are, have been renting AND saving money (it's a novel concept, I know) for the last 10 years. Maybe you were able to save $500 a month, doing cost-saving habits like skipping $7 Starbucks lattes everyday and making your own coffee at home, as an example. Now you have $60,000 after 10 years (and more if you wisely invested) and while it isn't 20% of that home value, you should still have enough to qualify for a mortgage with PMI.
For the sake of brevity, lets just keep it to a 30 year mortgage at 3.5%. Your payment per month is $1639. Taxes...lets say $5000 a year. Condo Fees lets say $200. There are other fees we could slap in there like PMI, Insurance, etc, so lets just add $100 for that. Total cost per month - $2,355.
Lets not forget the tax umbrella from your mortgage. Now everyone is different on exactly how much money they get back from owning a mortgage. My first year I got $8,000 back. It lowered each year. But if you just use my taxes as an example, you get the equivalent of $667 back per month which really lowers the cost per month to $1688.
Most rentals for a 1 bedroom around HJC are pretty expensive. The median rate is about $2500 a month, depending on your location and extras.
Yes, having a home means you are in a fixed location and the blog post says that millenials change jobs every 3 years - but if you live in an urban area like NYC or HJC, it is likely you will find or can find another job in the city, rather than having to move far away. If you stay in HJC for 3 years, it is also likely that buying is better than renting. I'm not a real estate guru, but after living in Hoboken for 23 years one thing is true - aside from the dot com crash and the 2007 crash, the real estate market has always been rising. Rents increase and home values increase.
Why throw away your money in rent when the cost to own is nearly the same...and if you do decide to leave HJC, you can leave with a profit the longer you stay. I bought my home in 2007, at the peak of the home value market and when the crash happened I thought "Man I was an idiot for buying when I did!"
Years passed and my home value dipped, then surged. If I sold today, my home would sell for about 30% more than what I paid for it...and after 9 years of paying a mortgage the principal has dropped significantly, and I would walk away with 45% of my home value...in cash.
Do the math, people. I SO WISH I bought when I first moved into Hoboken 23 years ago.
Now, back to the article:
"James Hamblin, The Atlantic's columnist, explains the phenomenon as follows: 'Over the past decade, psychologists carried out a great amount of research proving that, in terms of happiness and a sense of well-being, spending money on new experiences is much more profitable than buying new things. It brings more joy.'"
I agree with this, but I don't think that means buying a condo is a bad idea. I think its about frivolous expenses, like buying boots or buying a new camera or a new flat screen TV.
"There's one more thing. The things we own, especially if they're very expensive, make us worry about their condition. If you buy a car, you'll flinch every time someone's alarm sounds outside. If you buy a house and fill it with expensive items, you'll be afraid of being robbed. Not to mention the fact that a car can be scratched or break down, and a super expensive TV might break after a year of usage. But no one can ever take away the experiences you have."
Reading this makes me want to punch the author in the throat. It makes no sense to me that THIS is your argument why someone shouldn't buy a car or a house. What. The. Fuck.
Every purchase will go down in price over time
"Our parents weren't able to travel as often as we do. There wasn't the possibility to have so much fun. They didn't have so many opportunities to start a new business. Therefore, they invested in houses and cars, and we don't want to do that. After all, every purchase, if it's not a house or an apartment, will depreciate over time. And if we think about how quickly real estate depreciates during a crisis, then everything becomes even more obvious.
Experience is the only thing that matters: it won't go down in price, and no one can steal it."
Again: WHAT. THE. FUCK.
Were your parents living in the stone age of boredom? Did you even ask your parents how their lives were enriched? Cars do depreciate in value. Homes...not so much if you are living around NYC / HJC.
Here would be my advice to people (sheeple?) who read the article and are nodding vigorously to what the author wrote.
1. If you are in a stable job, consider buying. If you are in a job that isn't very stable, rent.
2. If you are renting, save money to eventually buy. This might mean, *gasp* no Vampire Weekend concert tickets for a bit.
3. Don't forget to invest in a 401K or pension. The whole "YOU GOTTA LIVE NOW" philosophy sounds great until you are 50 years old and realize you partied your whole 20's, 30's and 40's and suddenly you can never retire because you saved zero and rented your whole life.
4. I agree that money can't buy happiness. I know this first hand. But I found a healthy balance in my life where I do own a condo, I didn't own a car (I have one now because I need it for work), and had to skimp on certain things in my life (many "staycations" versus "vacations"). Life means working hard and sacrificing for the future. If you really think going through life means "YOLO" - you will find out the very hard way when you are older how cruel life can be. You have to plan for the future. It is easy to think your whole life will be one "Vampire Weekend party" until you are in your 40's and you have nothing to show for it.
If you rent an inexpensive apartment, don't own a car, are saving your money (investments or 401K), and have enough to enjoy life, I will tip my hat to you and say well done. You don't NEED to own a home if your rent is low enough that you are beating the costs of owning a home. I lived with roommates until I was 35 years old and saved enough money to buy a home. I couldn't be happier.