Millennials are finally starting to show interest in homeownership.
Weighed down by massive student debt and job struggles, the generation brutalized by the Great Recession has lacked both the money and the desire to buy homes. They’ve been a generation of renters.
But as millennials have entered their 30s, established themselves financially and started having families, they’ve gradually begun to show interest in homeownership, according to Fannie Mae economist Douglas Duncan.
To be sure, millennials still trail other generations in home buying by a long shot. But they are making gains as they age.
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“They were hard hit by the economy, went back to college because they couldn’t find jobs and got a later start,” said Duncan. “They will start catching up.”
The trend comes as a relief to real estate agents desperate to sell homes and economists worried that the economy would remain bogged down without enough first-time homebuyers. Typically, 20- and 30-somethings play an essential role in the economy and housing market. They become first-time homebuyers, filling their new homes with everything from appliances to yard equipment. Millennial home purchases also give older generations the chance to sell their own houses and move up.
Nicole Garcia, 31, and her boyfriend Alex Quevedo, 30, didn’t have an urgent need to become homeowners. In 2015, they scored a sweet deal on a nice one-bedroom rental with a backyard on SW 67th Ave. and Kendall Drive for $1,100, which allowed them to set aside some savings every month.
“Our apartment was cozy, but it wasn’t so small that we couldn’t stand to stay home,” says Garcia, who teaches sixth and seventh-grade math at Somerset Academy SoMi in South Miami. Quevedo works at SLS Consulting, a fire protection firm.
But after a year and a half of living together, they decided, almost on a whim, to start looking for a home to buy.
“We had already talked about marriage and finding a house together,” she says. “A lot of our friends already owned their own place, so it seemed like the next step for us.”
The couple, who is engaged to be married in May, casually started looking “sin apuro” — no rush — at homes online. Their budget was $350,000 or less. Garcia found a listing on Zillow for a 3/2 home on SW 103rd St. and Miller Drive going for $325,000. They went to see the property on Jan. 2. They closed the sale on Feb. 21, buying directly from the owner and using a mortgage broker to get pre-approved.
A PRACTICAL GENERATION
Surveys show millennials are a practical generation that watched parents struggle to hold onto jobs and homes as unemployment soared to 10 percent and housing prices crashed 30 percent in the Great Recession.
But Duncan, who has been tracking today’s millennials as they have been aging, is picking up on some solid trends in millennial home buying. He has seen distinct increases in buying as millennials have moved from their early 20s to late 20s and into their 30s. For example, as he followed a demographic group of people ages 28 to 29, he found that by the time the individuals were 30 to 31, they increased their home buying by 2.8 percent.
Millennials seem to be doing at a later age exactly what their parents’ generation did when younger, Duncan said. Millennials as a generation have delayed marriage and have waited for several years for the job market and pay to improve. But as incomes rise and they marry and get ready for children, they are less interested in cramming into studio apartments in high-demand areas, and start searching for homes or condos they can afford to buy.
However, an increase in home prices is an issue for young adults because income growth still is very weak, said Duncan. Nationally, housing prices have been growing at four times the rate of incomes. In 2016, Miami was ranked by Demographia as one of the least affordable housing markets in the U.S., with a median home price of $315,000 and a median household income of $51,500.
With the combination of rising prices and the impact of higher interest rates on mortgages, Duncan said the situation is “unsustainable” and will price first-time buyers out of the market.
Still, many millennials say they will not be pushed by concerns over rising prices to move faster than they should. Prior to the housing crash, which started slowly but took hold in 2008, people had been trying to rush ahead of fast-rising prices to buy while they thought they could. The overinflated market led to the crash.
Now many millennials have learned from the past and are determined to have their finances in solid condition before making a move.
WAITING FOR THE RIGHT TIME
Julia Duba, 25, and her boyfriend Norman Angel, 26, were renting a one-bedroom apartment on NE 136th St. in North Miami when they started house-hunting in 2015.
“We didn’t like the idea of wasting our money on rent,” says Duba, who works as a donor relations coordinator at the University of Miami. “We also thought that a mortgage might be cheaper.”
Armed with an FHA loan of $180,000, the couple used a realtor to look at properties in North Miami Beach, Hollywood and Davie. But their choices were limited. In December 2015, there were only 3,090 homes for sale under $300,000 in Miami-Dade and Broward counties combined (that number has shrunk to 2,062 as of February 2017).
So Duba and Angel, who is a firefighter for the city of Coral Gables, decided to stay put. They got married in December and plan to relocate to South Miami, where they will be closer to work, when their current lease expires later this year. They’re hoping to find a studio or one-bedroom apartment for $1,400 a month.
“It’s not like we were looking for a five-bedroom mansion,” Duba says. “But we realized we weren’t going to find what we wanted at the price we could afford. So now we’re just going to concentrate on our careers and pay off our student loans and credit cards, so we won’t have any debt and can save up for a decent down payment.”
Miami Herald staff writer Rene Rodriguez contributed to this report.