Is Buying A Home A Good Investment? Some Millennials Don’t Seem To Think So

Illustration: The Money Manual

At 26, Katie Gatti makes roughly $300,000 a year between her full-time job at a tech company and her own business as a personal finance blogger behind and coach. Together, she and her husband have a combined income of more than $500,000 — about four to five times more than the median income of first-time homebuyers in the US.

Despite that, Gatti and her husband have no desire to buy a home anytime soon. In fact, they’ve come to see it as a bad investment.

“It’s just not a priority for me – I’ve chosen to invest my money in the stock market instead and rent a million-dollar home for $3,000 per month with my husband,” Gatti told The Money Manual.

Buying a home has long been considered a major life milestone. Graduate college, get married, buy a home, and have children — in that exact order – for generations was symbolic of the American dream.

Financial services firm Legal & General did a study on US millennials and homeownership in 2021 and found that many now called owning a home a “distant dream” — 56% of those in the study said buying a home where they currently lived was hard or extremely hard. Half weren’t trying to save for a down payment.

Thanks to a mixture of external forces (rising home prices, the student loan debt crisis, a record performing stock market) and changing generational priorities (people choosing to get married later and people valuing travel and experiences over things) some millennials are shaking up whether homeownership is even a goal to aspire to.

Is Buying A Home The Right Path To Wealth?

Gatti wasn’t always against buying a house — at one time she seriously considered it.

After getting engaged at 25 and seeing her income rise to the low-six figures, Gatti and her husband started looking into buying a home.

“You’re entering into a marriage, people expect married people to live in a home that they own whether explicitly or implicitly,” said Gatti. “We looked at that home that was listed at $1.2 million and did the math.”

Gatti calculated that a 20% down payment on the house would cost the couple $240,000 and that their monthly mortgage would be roughly $4,300. Of that, over $3,000 would go toward unrecoverable costs like mortgage interest, taxes, insurance, and then home maintenance costs would need to be factored in.

That led Gatti to conclude that she’d be spending $3,000 a month on costs that wouldn’t be going towards equity if she bought a home, not different from spending $3,000 to rent a home.

“They’re effectively no different, but one requires a six-figure down payment and being a property owner where you are now on the hook for anything that breaks.” That led the couple to decide to keep renting.

Without being financially tied to a home, Gatti and her husband have gone about building wealth via investing. The couple lives cheaply and Gatti puts about 85% of her take-home pay towards her investment portfolio. She’s even started investing in real estate investment trusts (REITs) this year through the platform Fundrise and was happy to report that she saw a 10% return on the $500 she invested in her first three months.

Surging Housing Prices Have Some Rethinking The Homeownership Goal

Even with the household income for millennials being the highest of any generation and interest rates for mortgages being historically low, the surging housing market is still a major barrier for new buyers. CNBC reported in the fall of 2021, the average home price in the U.S. was $377,000, up 14% from the same time last year and up 30% from September 2019. This increase has been even higher in certain states, particularly on the West Coast.

For Eva Keller, 27, and her husband, buying a home where they live in Anaheim, California, is just not feasible within their budget. The average home price in their area at the end of 2021 according to Zillow is now a staggering $812,000.

“Unless I won a lottery, there is no way in hell I would ever own a home here,” Keller told The Money Manual. “Even if we saved up for 5 years or so for a down payment, we wouldn’t be able to afford the mortgage, property taxes, the cost of maintaining a house, etc.”

Instead, Keller and her husband have been living in a two-bedroom, one-bath apartment and they sublease one of the rooms to a coworker, effectively helping them cover about of third of their $1,600 plus monthly rent. The pair uses their savings to travel frequently, taking months-long road trips, one-week vacations, and going on weekend getaways.

It’s because of the lack of affordability around buying a home that Keller has had to rethink what her financial goals should even be.

“We would probably still have to have a roommate and we wouldn’t have money for any luxuries,” if we bought a house, Keller shared. “We would much rather be free to do as we please than be tied down to a house where all our money is tied up.”

Travel And Flexibility Win Out For Some

Having owned a home for a few years, April Samuelson, 35, found she prefers the life of a renter. Samuelson bought her first home in September 2018 and sold it two years later in December 2020 just before the pandemic hit.

“I absolutely hated owning a home and don’t want to do it again,” she told The Money Manual. “Homeownership ate all of my money and my time. I was having to spend all my time either fixing things or trying to hire people to fix them.”

Samuelson said though she was able to recuperate what she put into her former home when she sold it, she says what she will never be able to get back is the time and energy she feels she wasted on home maintenance.

“I value my time too much to go back to that. I am very happy to now submit a ticket when stuff breaks and just wait for my building’s maintenance man to fix it. I don’t think I’ll ever go back to homeownership,” she shared.

It’s not just the day-to-day flexibility of renting that some people are prizing, others are seeing eschewing homeownership as an opportunity to travel more.

Millennials as a generation prize travel and experiences over owning things. According to a 2018 study by Berkshire Hathway Travel Protection, millennials took an average of 5 trips a year and spent an average of $5,700 on travel compared to four and a half trips by the next highest group and $3,300 on travel by Gen X. When asked what they would do if given $5,000, travel was a close second to save for those surveyed.

The pull to travel rather than a home rings especially true for 31-year-old travel expert and founder of This Travel Dream, Trista Barwig, who says she’s just not ready to give up her globetrotting lifestyle.

“I have been to over 25 countries, and it feels great. That is what life is about to me: living as much as you possibly can without feeling trapped in one place mentally or physically,” Barwig said. “Traveling doesn’t mean that I am wasting my money. In fact, most of my savings go into my Roth IRA, 401K, crypto, and stocks.”

“Having a home simply feels too constricting for me right now. I think traveling and living as much as possible is part of my American dream, and owning a house feels like it can hinder that by creating more stress and expectations for me than necessary at this point in life.”

Advice To Others: Consider Throwing Out Conventional Wisdom

The advice from those who have decided buying a house just isn’t the right financial move? Give buying a house a lot of thought.

“What I always want people to understand is that this is a decision where you absolutely need to run the numbers and question conventional wisdom that buying is always better,” Gatti advises. “Go into it with eyes wide open about all of the costs associated, and honestly how it’s going to change your lifestyle — in some ways for better and in some ways for the worse, just depending on where you buy the property and what type of maintenance is involved.”