Top 5 Reasons Millennials Should Buy Their Own Home

Posted by Brittany Carr on Thursday, May 18th, 2017 at 1:30pm.

Written by Robert H. Ruth

Here we are at the height of the Spring home buying season and the media is abuzz with news about the Real Estate market surging.  In many locations across the country, a shortage of inventory has fueled a seller’s market with the presence of bidding wars for properties and pricing rising rapidly.  

Much of the focus in the media has been on trying to decipher the intentions of the millennial generation and whether they will buy homes or continue to rent. And quite frankly, the idea of figuring out what an entire generation will do is complete nonsense. Millennials will buy when it makes sense for them to do so, not before.  

Regardless of whether they buy now, or in the future, there are 5 things about home ownership that have been true for every generation of Americans:

  1. Paying rent is subsidizing your landlord

You get no financial benefit from paying rent because when you rent, you are in essence paying the mortgage for your landlord. You work hard for your money and the dollars that you give your landlord each month enables them to either own a home or use your hard earned money for their needs in some other fashion.  You lose your money each month when you give it to the landlord…the only thing you get in the deal is a place to live in and sleep at night. The landlord has total control over your living situation: if they fail to adequately maintain the property and postpone needed repairs you are impacted. In a large building they can rent to people who may not respect your privacy and rights to your detriment. The landlord might increase your rent without notice and you are forced to accept that fact, or find a different place to live.  

  1. Mortgage Interest is a Tax Deductible Expense

When you file your income tax return every year, you have a choice of either taking a standard deduction or itemizing deductions. Most renters do not have enough expenses to itemize, but when you own a home the interest you pay on the mortgage loan is a tax deductible expense as are your real estate taxes.

Being able to deduct these expenses from your income will lower your taxable income and may allow you to get a refund rather than owe money to the IRS. In addition, when you sell your home you may not have to pay capital gains tax if the value of the property increased by less than $250,000 and it was occupied as a primary residence for more than 2 years.

  1. Homes Build Equity Over Time, Increasing Your Wealth

There is no guarantee that a home will appreciate in value every year, or that it will prove to be a terrific investment. However, over time, most homes will increase in value.  For this reason, owning a home could be considered a key component of your wealth building strategy.  In the United States the annual rate of appreciation on real estate has averaged around 2%, but it seems that every decade there are brief spurts in the marketplace where values may increase at a faster rate, so maybe over the long haul you may actually increase by more.  

For example, if you bought a home in 1985 for $ 100,000 and it is now worth $300,000, you have seen the value increase by 200% in 32 years or 6.25% appreciation annually. There are not many investments you can live in that will give you any return let alone that kind of a return. It’s just like investing in general: if you aren’t in the market you will miss the increases.  Sure, there are tough periods, like the most recent recession, but the ebbs and flows are normal. The key is to not view your home as an investment, but as shelter for your family, one that has the added benefit of being more valuable in the future.

  1. Improvements Made To Your Home Help Enhance The Value

Now more than at any time in the past, home owners are making improvements and modifications to their properties. Whether you build an addition, add a deck and patio, totally redo the kitchen, or open up the floor plan and add a beautiful master bathroom, owners like to customize their homes to their unique needs. And this is a good thing as long as the improvements have appeal and utility to future buyers.

And one of the most important improvements is routinely and regularly maintaining your home.  If you own a home, you will need to invest 1-2% of its value in maintenance and repairs annually to protect your investment and guarantee the components of the home continue to function. When you go to sell your home in the future I guarantee you will get a better price for the home if your house exhibits pride of ownership.

  1. Interest Rates Are STILL Near Historic Low Levels

In the late 1970’s  to early 1980’s mortgage interest rates ranged from 18-21% . You read that correctly. Today’s rates are the lowest we have seen since the early 1950’s. The greatest benefit to having these low rates is that they make homes more affordable for buyers, and buyers can lock in the low payment for up to 30 years.  This is an unprecedented opportunity for purchasing a property. At some point in the future, rates will rise. And when they do start going up, my experience tells me they will do so in rapid fashion. So my message to you is this: use this opportunity to buy a home and lock in your housing expenses for your family for many years to come. You won’t be disappointed.


Robert H. Ruth
Senior Mortgage Banker
Direct: 401.789.4441
Mobile: 401.743.4364
NMLS ID: 513243

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