The Millennial generation is walking a path opposite of that of Baby Boomer parents by purchasing homes before marriage. Single Millennials who want to live in a house are either moving into houses with friends, or purchasing for themselves. Many Millennial couples are moving in together–without putting a ring on it. Why are the Millennials hunting for houses instead of spouses?
New Social Norms: It has become a social norm for Millennial couples to live together before marriage, giving them time to work out the kinks in the relationship before tying the knot. According to Time Magazine, “the rate of unmarried cohabitation has risen 1,000% over the past four decades.” Millennials still commit to one another, but in different ways. The term Beta Marriage was quite popular with the Millennials. Through a Beta Marriage, a couple is able to formalize or dissolve the marriage after a two year trial period. Millennials are not afraid of commitment; they are just developing a new way to commit—minus the wedding.
High Wedding Costs: Nowadays, to get hitched is not cheap, especially when Millennials worry about their wedding being boring or exactly like someone else’s. CNN reports the United States’ average cost of a wedding is about $30,000, whereas average wedding costs in 1995 were stated at $15,000–yet another costly aspect of life doubling over the years. That’s a large commitment to make in itself, so the question is this: Would you rather have a down payment on a house or a wedding?
High Rent Costs: Renters are overwhelmingly paying increasing rents while rent continues to sky rocket. The average rent in the United States is reported at a whopping $949.96 per month for a one bedroom unit in an urban location, or $746.52 per month outside of a city. For a three bedroom unit, renters are shelling out $1,653.13 per month within city limits, or $1,255.16 per month outside of city limits. Let’s put it in perspective: according to the the average rent in 1995 was documented at $450 per month. 2014 rent increases nearly doubled since 1995!
Tax Benefits of Homeownership: Homeowners can reap many benefits as far as taxes go. Write offs on Federal income taxes keep more money in our pockets, so Millennials are thinking, why not? The government placed a number of tax benefits to encourage consumers to purchase homes, making home ownership more desirable over marriage. Tax benefits include the following:
- Mortgage Interest: Mortgage interest, whether it was spent on building, purchasing, or improving a house, can potentially be tax deducted on a Federal tax return. Single homeowners can write off mortgage interest as long as the mortgage does not exceed 1 million dollars.
- Home Improvement: Out of pocket expenses towards home improvement and repairs are not necessarily tax deductible; however, the more money you invest in your home, the more money you get back when you sell.
- Closing Costs: Closing costs are inevitable, BUT you can partially or completely deduct them on federal tax returns at the end of the year.
- Capital Gains: When selling a house, the seller benefits from the income made if the selling price was more than the amount to purchase the house. Currently, capital gains are able to be excluded as income on federal tax returns up to $250,000 for single taxpayers, according to the IRS website.
For some Millennials, home ownership wins over marriage in the houses vs. spouses debate. Millennials again prove that they are not like their Baby Boomer parents. To them, an established lifestyle seems more appealing than jumping into marriage right away.