The concept of someday owning a home and being free of the costly burden of renting seems impossible for 27-year-old Harrison in Fargo, North Dakota.
Although he has a budget ceiling of $350,000 and $30,000 in cash for a down payment and closing costs, the median home listing price for his midwestern city towers at $389,500, according to Realtor.com data.
With the added expense of property taxes and home insurance premiums, Harrison, who asked to remain anonymous because of potential repercussions to his career, said he is worried that he’ll never be able to afford a home—even with a paid-off car, zero credit card debt, and no student loans.
Harrison is not alone: Millennials, born in 1981 to 1996, and others like him in Generation Z, born in 1997 to 2012, face an uphill battle on the path to first-time home ownership, particularly in the years following the COVID-19 pandemic.
Other millennials and Gen Zers who spoke with The Epoch Times pointed to massive increases in sale prices on homes that were considered affordable 30 years ago.
Some have turned to clever solutions to break into the home market.
Daniel McDonald, 30, became the winning bidder on a 1,600-square-foot, two-bedroom, two-bathroom duplex in Beverly, Massachusetts, after the original buyer backed out at the beginning of the COVID-19 pandemic when prices were relatively low.
He rented out part of the property, saved the proceeds, and bought another duplex a few streets away in 2022.
Yet despite his success with a practice known as “house hacking”—when you generate passive income from a piece of a property while residing there—Mr. McDonald told The Epoch Times that it could be 10 years or longer before he and his wife can afford a single-family home in their area.
Currently, the lowest price home for sale in Beverly on home marketplace Zillow is a three-bedroom, one-bathroom house for $565,000, after a $15,000 price cut on July 2.
“If we moved to a single-family [house] right now and bought that, we’d be spending $4,000 or $5,000 a month [on mortgage payments] with no help. It’s not like it’s an easy option,” he said, adding that limited inventory in the area is also a factor.
In Seattle, David Adams, 37, was racked with student debt and living in a high-rise apartment when he started Sniffspot, a business that allows homeowners to earn passive income while residing in their homes by renting out their yards and outdoor spaces to pet owners who live in apartments and condominiums.
Mr. Adams was looking for a home to accommodate his dogs when he bought a house in Salem, Massachusetts, during the COVID-19 pandemic when interest rates were lower and prices competitive. Still, with student debt to pay off and only self-employment income from his business, qualifying for a home wasn’t easy.
“It’s hard to find an affordable home in general and much harder to find an affordable home that provides a great life for dogs,” he told The Epoch Times.
Mr. Adams said that in a time of high inflation and sluggish wages, many of his clients are using their Sniffspot proceeds to “cover their mortgage and real estate taxes.”
Stephanie Douglass, 35, and Kristina Modares, 34, took an innovative approach to make buying a home affordable for them: They found friends to pool resources to purchase and co-own their first homes in Austin, Texas, in 2013 and 2015, respectively.
Finding success, they decided to teach the approach to others by founding Open House Austin in 2019 and later Open House Education to expand their process to a nationwide audience.
Even with their success, they say the market is much different today than it was 10 years ago.
“Now, it’s not only expensive, but the home prices are high, and [so are] the interest rates,” Ms. Modares told The Epoch Times.
Ms. Douglass said millennials and Gen Zers are facing new obstacles compared with those of homebuyers decades ago.
“It’s a very different market and world that first-time homebuyers are in now than when their parents were trying to do this,” she told The Epoch Times, adding that many young people are gig or freelance workers without the same income history.
“So there’s just a lot of factors changing in the world, and real estate is like an old industry and is not catching up as quickly as the world’s moving,” Ms. Douglass said.
Home Prices Soar
Home prices in the United States hit a new high in June, with the median home sale price climbing to $394,000—a 4.4 percent year-over-year increase, according to Redfin.The study authors noted that despite the decrease, “it nonetheless means that homeownership is unaffordable to many households.”
Zillow noted that five years ago, when mortgage rates were just above 4 percent and many home values were roughly half as much as they are now, a similar home would have been affordable with no money down.
Inflation and Unemployment
The annual inflation rate in June 2022 climbed to 9.1 percent in the largest increase in 40 years. While the inflation rate has gradually come down since then, the current rate of 3.3 percent is still significantly higher than the average 0.1 percent seen in 2015.The disparity is attributed to rapid increases in the value of financial assets for those younger than 39.
Debt and Spending Habits
For study findings published by LendingTree on June 24, researchers analyzed more than 428,000 anonymized credit reports from users in the 100 largest U.S. metropolitan areas.It found that in those areas, 97.1 percent of Gen Zers possess non-mortgage debt of some kind and that Gen Z is the most likely age group to have this type of debt. Among them, roughly 80.8 percent have credit card debt, and the median non-mortgage debt for that age group hovers at about $16,562.
As a group, millennials owe even more. Their non-mortgage debt averages $30,558, and 38.4 percent of them have student loan debt, which is the highest for any age group. Millennials are also the second most likely age group to have personal loans, with 16.8 percent owing a median balance of $2,921.
Looking nationwide, that report found 42.6 percent of millennials and 33.2 percent of Gen Z adults reported having credit card debt in August 2023.
Housing market expert Sofia Vyshnevska, chief operating officer and co-founder of NewHomesMate, a new-construction housing marketplace, said that the millennial and Gen Z debt-to-income ratios can be “heavily impacted by student loans,” making it harder to qualify for lending.
“Even those lucky enough not to have student debt are pushing their homeownership plans to around age 30,” she told The Epoch Times.
One reason is a “significant housing shortage” of approximately 3.2 million homes, and another is the meteoric rise in home values, she said.
Some, however, disagree that debt and spending habits are the main factors holding back millennials and Gen Zers from owning homes; Ms. Douglass calls it a “dangerous” stereotype.
She said credit card debt “definitely comes into play” when you’re trying to qualify for a mortgage, but she questions whether younger people spend more in general.
For those younger than 40, Ms. Modares said, spending is more about the “cost of living versus wages.”
For Gen Zers such as Harrison, debt isn’t a consideration. At 27, he has no student loan or credit card debt and has paid off his car. Even with $30,000 in savings, he’s unsure if he will ever own the modest house of his dreams.
The Path to Homeownership
Given all of the factors impeding young people from becoming homeowners, it’s not always clear how to overcome those odds.Ms. Vyshnevska, who is in the new-construction business, said one option is to look for new-construction financing incentives.
“Many builders are offering interest-rate buydown programs, down payment assistance, free upgrades, and some go even as far as eliminating closing fees,” she said. “This definitely helps to decrease the burden and make homeownership more affordable.”
For entrepreneurs such as Mr. McDonald, one solution is to find a passive income stream. Another option is to find a business partner, whether a friend or significant other, and pool together resources to buy a house.
With two incomes and two sources of credit, an expensive property for a single person could become attainable for two. However, he said, it’s important to consult a lawyer before such a sale to have any necessary legal contracts or documents drafted to cover future changes, such as one buyer wanting to sell in five years against the wishes of the other.
Ms. Douglass and Ms. Modares took a similar approach before they started their real estate business in Austin. They also saw a gap in educational outreach for first-time buyers.
“And specifically, for first-time buyers wanting to do things in a different way—to do things creatively, to do things outside of the traditional way, that’s, you know, you get married, have a kid, then buy a house,” Ms. Douglass said.
Despite the roadblocks that young people face when thinking about the looming prospect of homeownership, Ms. Modares insists that the dream “is still possible.”
She tells first-time buyers, “There’s still hope,” especially if they see it as an investment toward a better home in the future.
Ms. Douglass offers them another perspective: that they can keep renting, but if they choose to buy, they can supplement a mortgage by renting out rooms.
“Then from there, you can figure out your strategy,“ she said. ”Maybe you just buy one house, and you house-hack it so that you’re paying very little.
“If we can look at it more of like a tool in your finances, there’s so much power there that you have access to when you own a home.”
Ms. Vyshnevska said purchasing a first home might be challenging, but she tells young buyers not to give up.
“Believe in your dreams, be patient, and don’t be discouraged by obstacles,” she said.
