A recent study from Trulia revealed that 60 percent of young American adults live with parents, other relatives, friends or roommates as high rents and high home prices make living solo unaffordable.
Trulia’s Mark Uh writes that in Miami, a typical renter would need to spend almost half of their income on renting a one-bedroom apartment but for a millennial, it’s even more expensive. According to the data, the average millennial in Miami would need to spend 54% of their income on rent for a typical one-bedroom apartment.
Regional differences among major markets do exist, however. The report from Trulia found that millennials pay more than typical renters in Boston and Los Angeles, but pay less in San Francisco and New York.
For renters in high-cost markets, it appears to be much more affordable to rent a two-bedroom home with a roommate rather than living alone in a one-bedroom home.
According to the data reported by Trulia, double-digit savings can be achieved in 11 of the top 25 rental markets in the U.S.; however, Miami is a unique case. Despite the savings being the highest among the top rental markets, the 19.2 percent savings from renting with a roommate would still leave the rent unaffordable by U.S. government metrics.
With these challenges in affordability, homeownership may prove to be a more financially savvy option over renting. With several low money down payment options available and mortgage rates remaining near historic lows, millennials may be surprised at how affordable buying a home can be. For example, FHA loans only require 3.5% down, tend to have lower credit score requirements, and competitively priced interest rates. Likewise, even a conventional 30 year fixed rate mortgage can be obtained with less than 20% down for qualified borrowers; however, they do require additional mortgage insurance premiums that must be paid until the borrower builds 20% in equity.
If you’re thinking of making the switch from renting with roommates to owning your own home in Texas, please browse our home loan options and give us a call for a free rate quote. (972) 591-3097