- Millennials are buying houses with their friends to become homeowners, the WSJ reports.
- The housing crisis has pushed home prices to record highs, boxing some millennials out of the market.
- Also – it’s just really expensive to be single.
First-time homebuying millennials are finding a loophole in today’s housing crisis: buying a home with their friends.
Some members of the generation are turning to co-buying as a way to overcome economic and cultural hurdles that stand in the way of homeownership, The Wall Street Journal’s Alex Janin reported. It’s a pre-pandemic trend, she wrote, largely accelerated by the desire for remote work and an expensive real estate market.
The number of buyers purchasing as an unmarried couple during April to June 2020 increased to 11% from 9% during the same time frame in 2019, per data from the National Association of Realtors (NAR).
“During the pandemic, people have been renting and they may have wanted more space, and so they looked at, perhaps, their roommate and decided, ‘Let’s go buy a home together,'” Jessica Lautz, vice president of demographics and behavioral insights for the National Association of Realtors (NAR), told Janin.
Pre-pandemic, it was already a tough world for aspiring millennial homebuyers, who struggled to save for a down payment as they dealt with the financial fallout of the Great Recession, staggering student-loan debt, and soaring living costs. As they aged into their peak homebuying years in 2020, they led a housing boom that soon morphed into a historic inventory crisis that was already forming over the past dozen years as contractors underbuilt homes.
Home prices shot up, reaching a record high of $386,888 in June. The biggest victim of this housing shortfall was the starter home, which was already nearing its demise even before the pandemic. While the housing market has since begun to cool and contractors have begun to build more homes, these homes are in the higher end of the market, NAR’s director of housing and commercial research, Gay Cororaton, told Insider.
These affordability issues have boxed many millennials out of the housing market, forcing them to get resourceful in finding ways to fast-track their path to homeownership. For some, that’s moving out to the exurbs or buying fixer-uppers. For others, it’s inventing their own commune.
The single life is an expensive one
Millennials’ lifestyle choices are also shaping their co-buying decisions.
The generation has established a new normal, in which getting married and having kids comes later in life, after going to college and becoming financially settled. It’s contributing to a decline in marriage rates and birth rates.
Millennials “have a lot more options and they don’t have to settle down quite as early as people in previous generations were expected to do,” Clare Mehta, an associate professor of psychology at Emmanuel College, previously told Insider.
Homeownership is the one milestone that remains important to the generation. To nearly three-fourths of millennials surveyed in a Bank of America Research study, it’s more significant than getting married and having children. It partly explains why more millennial couples are buying houses together before tying the knot.
But buying a house when you don’t have a partner isn’t quite as feasible. As Insider’s Juliana Kaplan recently reported on recent Pew data, nearly 40% of young adults who aren’t in couples make less money than their peers.
It’s especially troublesome for women, who typically make less than men regardless of relationship status thanks to the wage gap. Recent research from Freddie Mac found that the majority of single women head of household renters (60%) think they won’t ever be able to afford the home. Most said they don’t have enough savings for a down payment or think a mortgage would be too expensive.
Teaming up with a friend or roommate cuts the individual price of a home in half, enabling millennials to buy a home with less money saved. While there are complicated factors involved, such as deciding how to share equity and what to do in the case of a fallout, millennials are ultimately seeing the move as a win-win situation: they get a stake in an appreciating real estate market and get to fulfill their desire for communal living.