Power Lunch

Power Lunch

Millennials put off home buying, despite rising rent

20-somethings: Renting vs. buying
20-somethings: Renting vs. buying

Rents are rising while interest rates remain low, yet young Americans are still largely choosing to rent instead of buy.

Home rent costs have jumped 14 percent since 2010, and are expected to rise another 3.3 percent this year, to year to an average of $1,161, according to commercial property tracker to Reis Inc.

Real estate agent Joan Kamens said high student loan debt is preventing adequate debt to income ratios required by lenders for a mortgage.

Lifestyle habits are a significant contributor as well, she added.

"Millennials are getting married later in life than previous generations, and a sense of urgency to purchase comes with stability, marriage and growing families," said Kamens, an agent with Coldwell Banker Hearthside in Newtown, Pennsylvania, near Philadelphia. She is also the mother of two 20-somethings.

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According to a recent Goldman Sachs study, 30 percent of millennials consider buying a home important but not a priority.

So when will the next generation start to buy houses? Kamens said it will happen once they're more established in their careers and family, and "when education for children becomes a factor, they may settle with less for the convenience of quick travel time to workplace."

Neeta Mulgaokar, a real estate agent in New York with Mirador and a millennial, stands by the trend.

"Many of my clients are saying, 'Why would I buy when it's so expensive? I could use that money for something else like travel or starting a business.' "

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Another big factor is the transient nature of the generation's preferences coupled with the technology that supports their habits.

"Many companies, like Ernst & Young, are including remote work options for their millennial employees," Mulgaokar pointed out.

"Many millennials have been burned or felt trapped by contracts (cell phones, cable, even student loans) and are shying away from long-term commitment," she said. "They will pay more to avoid it all together."

—The Associated Press contributed to this report.