Tuesday, November 14, 2023
I’ve been thinking about millennials coming into their homebuying season of life, and what a jolt it is for many who waited longer than previous generations to buy a starter home. The market didn’t actually favor waiting, which makes the leap not only feel larger: that leap is larger for this group.
For millennials who went to college, the journey into homeownership can feel more daunting, instead of less. Which wasn’t supposed to be the deal was it? But there that deal is, nonetheless.
We (I’m talking about generations older than millennials here) set a stage of expectations for this cohort that didn’t end up holding true. In our defense, we told them some things that did end up being correct, like generally the more educated you are, the more lifetime earnings you’ll accumulate. We said learn your history and take your place in line for the order of things, and eventually it will be your time to shine. We stand by those pieces of advice.
But there were some others things we told that that it turns out we were wrong about. We told them to do what you love and the money would follow. Wrong. We said if they graduate college and don’t know what they want to do, stay in school and get a graduate degree or two. Specialize, we said, and the money will follow.
For some the money did follow, but for many the money didn’t follow in a high enough degree to pay off the financing costs of those advanced degrees. We also weren’t quite up front with them when in their 20s they told us they didn’t ever want to own anything. I’m not sure we knew how to react when their younger selves told us we were chumps for buying into the treadmill of life: homeownership, kids, jobs that continually ate up our time and talents.
Truth be told, we thought they might have a point, while at the same time we mostly thought “they will change their minds”. But they held out longer than we thought they would!
And now the market is very different than it was even three short years ago. It’s a tricky one out there, with interest rates higher than they’ve been in some time, and an inventory shortage that’s going to stay with us for a while. Prices are high. Money is expensive. There’s competition from the Gen Zers now, too.
So, like some of the generations before them, millennials are not going to have the easiest of time getting started building wealth via homeownership. It’s going to require creative solutions, and not necessarily new ones. It’s time to dust off some of the old tried and true methods for keeping the purchase market moving – which it always has done, and always will do.
Let’s get back to things like: buying on contract, and investing our sweat equity. Let’s remember what the basic starter home has entailed for most of modern history. They weren’t a 3/2/3 on a quiet cul-de-sac, they were much more humble than that. Let’s remember the practical tool that is mortgage insurance. And for heaven’s sake ,let’s remember how to save over years for our down payments, and let’s modernize our gift funds programs so friends and family can help first-time buyers get started on their path to homeownership.
Because homeownership is still the single best way we know to secure a family’s future for generations to come.
Until next time,
Mary Schuster
Chief Knowledge Officer
October Research, LLC