Older generations have always loved pointing out how “kids have it so easy these days” and millennials, with their smartphones and safe spaces, have been a particularly popular target.
But when it comes to one of the most important purchases of a lifetime, young homebuyers have it significantly more difficult than their parents.
“I would like to get everything we want but that may not be realistic,” said Britney Prince.
She and her husband, Jerald, have been married for two years and have been renting a home in Dallas but hope to buy a home next year.
At the top of their wish list is a three-bedroom home with a yard somewhere in the Irving area to help ease the work commute for each of them.
“Location is key,” said Prince as she clicked through Redfin, Zillow, and other real estate websites. Finding a home that suits their needs requires her to check the sites often.
“A lot of these really nice homes are going within a few days," she said.
The market in North Texas is hot, meaning homes do not stay on the market long and the costs of home ownership are only going up.
For millennials, the cost of a home and the costs they've already incurred in their short lifetimes make homeownership nearly impossible for some.
“We, like a lot of millennials, have student debt,” Prince said.
The rising costs of college added to inflation and stagnant wage growth puts college grads in a hole that cripples the all-important credit rating necessary to secure a home loan. Holly Signorelli is a CPA and author who has seen the deck stacked against young, prospective home buyers.
“A lot of people are still paying off student loan debt into their late 30s and that really crushes your credit,” Signorelli said.
A low credit score makes it difficult to secure a good interest rate and student loan debt cuts into the ability to save money for a down payment. Data from the National Association of Realtors shows the average age of first-time homebuyers was between 21-35 in the year 1981. Today, the average age is 44. Census data also shows the median home price in the United States has ballooned from around $70,000 to more than $210,000 over the same amount of time.
“The biggest challenge has been saving for a down payment,” said Jerald Prince.
Signorelli's advice is you should have at least three times the amount of your down payment in your savings, but a big down payment is not necessary.
“You do not have to put a lot of money down on a house,” she said.
While a larger down payment could help lower a monthly mortgage payment and avoid the need for mortgage insurance, Holly recommends devoting the time and money towards paying down any student loan debt or other debt not attached to an asset.
She also suggests young people use the 30% figure as a way of determining how much they should pay for a home.
“Make sure the complete payment for your mortgage is less than 30 percent of your income," Signorelli said.