The cost to rent a home is rising, but this isn’t stopping millennials from doing it. Mortgage rate trends are in home buyers’ favor; by the end of 2014 they had fallen to the lowest rates in a year and a half, which reduced borrowing costs. However, millennials are still renting — or living at home — for a few reasons.
According to CNBC, the average rate for renting a home has jumped 14% in the last five years. Experts sat the rate will likely rise another 3.3% in 2015 alone, which brings the average rent price in the U.S. to $1,161.
So if rent prices are rising and borrowing costs are falling, why aren’t millennials buying houses?
CNN Money reports that the percentage of homeowners between the ages of 18 and 34 is at a record low — only 13.2%. Furthermore, 31% of people aged 18 to 34 are living with their parents.
One of the reasons millennials are renting instead of buying is that large amounts of student loan debt mean that the average millennial’s debt-to-income ratio makes it tough to find a lender that will give them a mortgage.
Furthermore, millennials simply don’t want to be tied down. The most common mortgages (either fixed-rate or adjustable-rate) are 30-year mortgages, although there are shorter pay-back periods of 10, 15, or 20 years.
Real estate agent Joan Kamens told CNBC that millennials may be more keen on buying later in life when they’re looking for the stability of owning a home.
“Millennials are getting married later in life than previous generations, and a sense of urgency to purchase comes with stability, marriage and growing families,” she explained.