For many people, when we were starting out in our careers, earning a six-figure salary was the ultimate goal. If you made $100,000 or more, you were considered relatively successful. The compensation would afford you the opportunity to fulfill the American dream—owning a home with a white picket fence in a lovely neighborhood with good schools for when you have children. Fast-forward to today and that has all changed.

According to the Wall Street Journal, there is a growing trend of $100k-earning professionals electing to rent instead of purchasing homes. Almost 20% of households earning $100k or more are bucking historical norms and renting apartments. A $100k income is still considered a comfortable living, dependent upon the city. To put things into perspective, the median U.S. household income, according to the Census Bureau, was $63,179 in 2018.

Here’s why this trend is an issue. The reasons for renting—compared to buying a home—are complex. Due to exceedingly high student-loan debt, burdensome personal expenses (such as insurance and health care costs), leased cars, credit card debt, smartphones, utility bills and other expenses have made it difficult for potential buyers to save enough for the down payment on a home.

The high—almost prohibitive—cost of housing, coming up with the money needed for closing on a house and concerns over the safety of their jobs—coupled with the probability of being relocated by their employer and withstanding stagnant wages—contribute to the decision to rent rather than purchase. The feelings of financial and job insecurity serve as a barrier to buying a home.

Another reason people are opting out of purchasing homes is the increasing migration pattern to big metropolitan areas. Pew Research shows that 88% of Millennials lived in cities in 2018. This is due, in part, to seek out more employment opportunities with long-term career growth. It is also preferable for many to have access to the culture, excitement and action associated with a vibrant city—compared to living in a suburb.

The New York Federal Reserve Bank reported that the student debt of Americans is at about $1.5 trillion, the majority of which is owed by young adults. The exorbitant amount of money owed is an important factor in the choices made by people, including purchasing a home. The trope of young adults delaying “adulting” is true—except it’s mainly because of financial reasons. Living at home with your parents after college is actually a prudent move to save enough money to buy a home and pay off your student loans.

Buying a house requires a fairly substantial amount of savings. The median home for sale in the U.S. is more than $258,000. Factor in down payments, closing costs and other related expenses and you may need $30,000 or more. Without the help of their parents, many people don’t have this amount readily available.

Home buying is one of life’s most stressful events, along with getting married, starting a new job and having a child. Comparatively, renting is relatively easier. You need to complete an application and come up with a security deposit and first month’s rent. Then, you can most likely move right in. There’s no need for lawyers, home inspectors and banks scrutinizing all of your finances.

Historically, buying your own home was a fantastic investment and a gateway to building wealth. Real estate seemed to always go up. Many American families built a sizable fortune on the value of their homes. Upon retiring, they could sell their house for a substantial profit, use this windfall to buy another home in a lower-cost state or use it to help fund their retirement.

Renters can’t build up equity. Their monthly payments are expenses that don’t grow, like paying off a mortgage does. After 20 years, a homeowner may have a home that has appreciated hundreds of thousands of dollars more than what they paid for it. A renter will be out of all the money they spent on rent and have nothing tangible to show for it 20 years later.

Housing prices continue to rise in the U.S. and the longer people wait, the more expensive and prohibitive it may be for them to enter the market. Priced out of the housing market, there may be a large segment that will not benefit from the tradition of home ownership and the accompanying long-term appreciation in value and subsequent large financial gain in their investment.

Renters will continue to pay off student debt, their monthly rent and all other expenses. It will be a drag on them to accumulate money for a better life and comfortable retirement. The high expenses may make them decide not to have children. Less home ownership, families with no—or fewer—children, the lack of building long-term equity via a home and other related factors attendant with this growing trend may influence big changes in our nation moving forward.

Via Forbes