Millennials Are Homeowners (It’s True!): A Myth-busting Series (Part 1)
There is a popular perception of America’s millennial generation when it concerns homeownership: They’re not ready to be homeowners.
This may be because Millennials, those young people between the ages of 18 and 34, are believed to have too much student debt, still live at home with their parents, and barely save enough money to be able to afford a home.
“Even if Millennials can afford to make a down payment, they are more likely to rent a home than to buy one,” says Mike Orr, director of the Center for Real Estate Theory and Practice at the W. P. Carey School of Business at Arizona State University.
The reason for this, he says, is that the idea of owning a home can be “intimidating.”
“I think this age group has more apprehension than past generations about making the commitment to own a home, based on what’s happened in the economy over the last decade,” says Orr.
Or are they?
It’s not that these young people are shirking responsibility, but because they are delaying marriage and starting a family, says Dr. Stan Humphries, the chief economist of Zillow, a real estate listing website. This is why Zillow predicts that 2015 is going to be the year when Millennials outpace their previous generation, Generation X, as the largest group of homebuyers.
Whatever the experts and the reports may say, there are young people who are buying their own homes — and shouldering all the responsibilities that come with it.
The Home Story spoke with three young people about the promise and the challenge of being a new homeowner, and how it all became a reality.
In this first installment, Rebecca Stump, a Lancaster, PA native now living in New York City, shares her story on buying her first apartment in the Big Apple.
“Homeownership was something my parents always talked about growing up,” says Stump, “because they have always believed in the power of owning your own home and the equity you can build if you own and take care of it.”
Speaking from her studio apartment in Manhattan’s West Village neighborhood in New York City, the bubbly 25-year-old brand partnership manager for MindBodyGreen, a digital media company that focuses on wellness, says she was reminded of her parents’ message after renting a shoddy apartment with her friend for three years.
While the rental was in a neighborhood she adored, her bedroom didn’t have a window, there were no closets to be spoken of, and the bathroom ceiling was always sagging — “very typical New York stuff that you deal with,” she says.
As a self-professed neat freak who values organization and the occasional alone time, paying $1,200 a month for her portion of the rent in exchange for these conditions was losing its appeal.
So, her parents asked, why not buy instead?
It wasn’t financially impossible for Stump. She had her own money tied up in investments, and with her father offering to pay a portion of the down payment, it certainly was a tangible possibility.
So she called up the same real estate agent who helped her find her rental apartment and set out to find a new apartment in the West Village.
“I knew, between my parents and myself, what amount [of money] I had to play with for the down payment,” says Stump, adding that she also sketched out what the ideal monthly mortgage payment and co-op fee would be.
It is not uncommon for young buyers to ask their parents for financial assistance to make their down payment. Last year, a Trulia report found that nearly 50 percent of young adults said they would go to their parents and relatives for financial assistance when buying a home.
After looking for apartments in the West Village in her price range, Stump eventually found a 450-square-foot studio apartment in a co-op building.
“It was fully refurbished, so I had to do zero work to it, which was important to me because I am not very handy,” she says with a laugh.
When it came time to close on her apartment and secure a mortgage, she had to pull together a host of financial documents (like credit reports and tax statements) for her and her father. “Because I was buying it jointly with my father, everything that was needed from me was also needed from him,” she says.
The building where she bought required a minimum 10 percent down payment. With the money she took out from her other investments, and with her father’s contribution, she was able to make a down payment of about two-thirds of the apartment’s price.
The process itself, from making an offer on the apartment to closing the deal, only took three months, but “it was definitely a little scary to sign on the dotted line,” she says.
When it was all over, she was a co-owner of a New York City apartment. Now barely a year into it, she has found the experience to be both rewarding and surprisingly affordable. “My monthly mortgage plus co-op fee is no more than the rent I would otherwise be paying,” she says.
As for how long she plans to live in her apartment she cannot say. “You just can’t see how your life is going to be in five to 10 years,” says Stump.
Per the rules of her co-op, if she lives in her apartment for at least four years, she would be allowed to sublease her apartment “indefinitely.”
“After that time period, if I decide to move, I can still keep it as an investment property and sublease it for additional income,” says Stump.
And while research suggests that Millennials are putting off homeownership until they have married and started having children, Stump, now single, never thought she was “too young to buy.”
“I love living in New York,” she says. “I am young and I have the excess energy to do it.”