[Serious] How is the millennial generation buying homes?

[s0me0nesmind1]

Yes you have to pay PMI but it works out favorably financially in the end as long as you stay at the place for more than a few years (aka not what we did the first time around because it turns out sharing an old house with someone sucks), trust me I made some cool matlab plots to prove it.

One big caveat about PMI that I just have to state - I don't know if this is for all loans, but at least with FHA loans today REGARDLESS of if you pay off 20% of the home, the PMI stays on for the life of the loan.

~5 years ago or whatever before this rule changed, after you reached 20% equity on the loan they would take the PMI off. So yeah, that kinda sucks.

 

[Red Squirrel]

Sure glad I don't have to be making 100k to own a house.... or I'd still be living with my parents lol. I got a 25 year mortgage, but I pay 250 extra biweekly to pay it down faster. $650 is my payment per 2 weeks. I figure I have like 7-8ish years left. I knock down about 10k per year and I'm down to 80k.

 

[repoman0]

One big caveat about PMI that I just have to state - I don't know if this is for all loans, but at least with FHA loans today REGARDLESS of if you pay off 20% of the home, the PMI stays on for the life of the loan.

~5 years ago or whatever before this rule changed, after you reached 20% equity on the loan they would take the PMI off. So yeah, that kinda sucks.

Yeah I’ve heard that about FHA. Regular banks just gave us a normal loan with <4% interest and we have to pay PMI until we reach 20% equity, aka some set date in the future. Taking into account even modest price appreciation and rent in the meantime it’s hard to make paying the PMI not worth it in the calcs. Paying it for the lifetime of the loan like some friends are doing is probably a different story.

Edit: the one scam that all the banks seem to pull is that they only take it off automatically at 22% equity which is like another year+ of payments. You can call at 20% though and tell them to take it off.

 

[TheVrolok]

These threads are filled with anecdotes without enough context. "I did it, so it's doable" is an incredibly poor generalization. The facts are such that it is much, much, much harder for the millennial generation to achieve the same financial/life metrics at the same time as previous generations (wage growth vs CoL, student loans, etc. Etc.).

THAT SAID, those are the rules of the game right now and there's no excuse for having expectations outside the realm of reality (which I think IS a problem with many in the generation).

As many in this thread have alluded to, there are trade offs. I've made "it work" as a millennial like many of you. I live in a big house in a nice area with a good school district and great job and a 12 minute commute. Is it my dream area? No not really, but it's not bad. Is it a perfect house? No, but close.

At the same time, so much of this came down to luck. Born into the right family (values, not trust fund), got good genes to be successful, found the right woman, etc. Not everyone got dealt the same cards I did.

 

[s0me0nesmind1]

These threads are filled with anecdotes without enough context. "I did it, so it's doable" is an incredibly poor generalization. The facts are such that it is much, much, much harder for the millennial generation to achieve the same financial/life metrics at the same time as previous generations (wage growth vs CoL, student loans, etc. Etc.).

THAT SAID, those are the rules of the game right now and there's no excuse for having expectations outside the realm of reality (which I think IS a problem with many in the generation).

As many in this thread have alluded to, there are trade offs. I've made "it work" as a millennial like many of you. I live in a big house in a nice area with a good school district and great job and a 12 minute commute. Is it my dream area? No not really, but it's not bad. Is it a perfect house? No, but close.

At the same time, so much of this came down to luck. Born into the right family (values, not trust fund), got good genes to be successful, found the right woman, etc. Not everyone got dealt the same cards I did.

I think there is some general commonality though that a lot of people here are relating to...

NO - YOU as a millenial cannot live in the downtown of NYC/NJ/CA-LA, CA-SF,IL-CH and expect a reasonably priced home.

 

[TheVrolok]

I think there is some general commonality though that a lot of people here are relating to...

NO - YOU as a millenial cannot live in the downtown of NYC/NJ/CA-LA, CA-SF,IL-CH and expect a reasonably priced home.

Totally true. Probably even beyond that, not just living in big metro areas, but you're first home is unlikely to be a dream mansion that's move in reasdy.

 

[snoopy7548]

Your 20s are where you set the stage for financial stability in your 30s. Coming out of college, it's temping to to go all-out and buy new furniture, finance (or lease) a new car, and move into a fancy new apartment in a fun area or city. If you're wise, you won't choose any of those, especially if you have student loans. But when you're 21 or 22, wise = boring. I've seen a lot of people who don't sit down and take a look at their future or finances until they're approaching 30 or well into their mid-30s, at which point they've already wasted tens of thousands of dollars which could have been a 20% downpayment on a modest house in the suburbs or a decent 401k balance.

 

[Mai72]

Lost of reasons. Many young people today don't value buying a house like previous generations. Also, student loan debt is weighing millennials down. Wage growth is low as well. In addition, young people are going where the higher wages are, and that's mostly in cities. Being able to relocate is a plus for many. Etc... I'm GenX and I don't have a home. My rent is $650 a month. That's cheap in NJ. So, I'm able to put away a lot of my income. Like 80% of it. Then again, I don't have a wiife and kids, so I'm very flexible. I'm actually considering taking a job in Vietnam. I like the flexibility.

 

[purbeast0]

I'm "technically" a millenial but I turn 38 in November. I bought my first house when I was 31 with my wife and we put 5% down. Thankfully Navy Federal has no PMI even if you put down 0%. We were going to put down 3% but got a better rate doing 5% so we went with that. The loan was for $397k. I make good money and she makes okay money so we're more than comfortable now. Stuff just ain't cheap in the DMV though. A lot of people are moving out a bit further from DC due to it.

And fuck long commutes. My borderline commute distance is 30 minutes no traffic. Now thankfully I'm only commuting like 20 minutes no traffic and it's fantastic.

 

[Exterous]

Without making this thread super long with details, my wife and I (29,31) with all income and costs taken into account, can only save $400 a month. Maybe some months we could save a bit more, but we feel comfortable with that set amount right now. We both have advanced degrees and she even has a doctorate. We just met with our financial adviser who showed us that with just saving $400 a month plus the savings we currently have, it will take us roughly 21 years to afford a down payment on a house if we want to aim for a "full" 20% down payment... and this assumed no extra increases in expenses such as ohhhh I don't know, the kid we expect to have next year, and the cars we will undoubtedly need to also have money set aside for, and the bigger apartment we'll likely need (currently in a 800sqft 2bed).

How is our generation expected to buy housing going forward

As Dr. Detroit said its hard to give suggestions for you without specifics so that just leaves our stories. So this millennial did it by driving old but reliable cars and staying in a 700sqft 1 bathroom rented townhouse till we saved enough to buy a house. Hell I kept my 2005 civic over 11 years and into our second, larger house where teenagers in my new neighborhood had newer and nicer cars than I did. It's all about trade offs and realizing that you can actually raise a family in an 800 Sq ft 1 bathroom apartment or house. Or that you don't really need a new car or SUV with a kid or two. Sure debt and income are issues but so are the material expectations.

And what's so wrong about a second job? I studied my ass off to get a degree in a field that cratered just a couple of years before the great recession. So I got a low paying job in that field and another low paying job elsewhere. I then moved myself into IT and kept two jobs to pay off the degree I wasn't using and save for things like a house and retirement.

 

[rcpratt]

As Dr. Detroit said its hard to give suggestions for you without specifics so that just leaves our stories. So this millennial did it by driving old but reliable cars and staying in a 700sqft 1 bathroom rented townhouse till we saved enough to buy a house. Hell I kept my 2005 civic over 11 years and into our second, larger house where teenagers in my new neighborhood had newer and nicer cars than I did. It's all about trade offs and realizing that you can actually raise a family in an 800 Sq ft 1 bathroom apartment or house. Or that you don't really need a new car or SUV with a kid or two. Sure debt and income are issues but so are the material expectations.

Not gonna lie, I don’t know how you’re supposed to fit two car seats in some of these cars, and even small SUVs. Car seats these days are huge.

 

[s0me0nesmind1]

As Dr. Detroit said its hard to give suggestions for you without specifics so that just leaves our stories. So this millennial did it by driving old but reliable cars and staying in a 700sqft 1 bathroom rented townhouse till we saved enough to buy a house. Hell I kept my 2005 civic over 11 years and into our second, larger house where teenagers in my new neighborhood had newer and nicer cars than I did. It's all about trade offs and realizing that you can actually raise a family in an 800 Sq ft 1 bathroom apartment or house. Or that you don't really need a new car or SUV with a kid or two. Sure debt and income are issues but so are the material expectations.

And what's so wrong about a second job? I studied my ass off to get a degree in a field that cratered just a couple of years before the great recession. So I got a low paying job in that field and another low paying job elsewhere. I then moved myself into IT and kept two jobs to pay off the degree I wasn't using and save for things like a house and retirement.

Yup - while we recently upgraded our home substantially - I don't exactly fit in with my beater 2006 Acura TSX heh. Oh well, don't care. I don't even commute anymore since I work from home...

But my main point is I don't understand everyones fascination with buying the most depreciable asset you can buy (outside of maybe a boat?) just because you don't like your current one as much as a new one. It's pure stupidity.

Not gonna lie, I don’t know how you’re supposed to fit two car seats in some of these cars, and even small SUVs. Car seats these days are huge.

Yar. I totally get that.

That's one of the reasons I'm going to have to toss my Acura and finally get rid of it soon....

We took a road trip with our 1 year old daughter a year or so back... The entire car was STUFFED to the brim with shit. Car seat here, pack-and-play for her to sleep in, suitcase for her clothes, diapers, bottles, blah blah blah. That's not even getting into our stuff. Once kid #2 comes, an SUV is sadly going to be something I'm going to need to get.

 

[Viper GTS]

Yup - while we recently upgraded our home substantially - I don't exactly fit in with my beater 2006 Acura TSX heh. Oh well, don't care. I don't even commute anymore since I work from home...

But my main point is I don't understand everyones fascination with buying the most depreciable asset you can buy (outside of maybe a boat?) just because you don't like your current one as much as a new one. It's pure stupidity.

Safety is a big issue as well. If you are blessed with perfect vision then maybe it doesn't matter for you but newer cars influenced by IIHS headlight testing have dramatically better headlights than older stuff. Not to mention the normal safety stuff that just gets better with technological progress. Anyone who claims that a 10+ year old vehicle is functionally identical to a new one save for new and shiny is wildly mistaken.

Viper GTS

 

[Brainonska511]

NO - YOU as a millenial cannot live in the downtown of NYC/NJ/CA-LA, CA-SF,IL-CH and expect a reasonably priced home.

I don't know if you've noticed, but not everyone is looking to live in downtown [insert metro area]. Housing prices across major metro areas are insane, and not just in the city center. Building has not kept pace with the number of jobs in cities, and as you might expect, a lack of supply with high demand has led to super high prices.

 

[Zeze]

With parents' help where you pay them back over a longer period of time interest free. Around here, there are a ton of new construction going for $800k+ and every week someone under 30 is moving in with their young kids. Not to mention the $18k in property taxes that go with it every year. I can't imagine many of them make over $250k combined even for NY. They get help from others.

On the same token, we will be helping our kids as much as we can. Or better yet, we'll all move out of this area where union salaries drive up all the costs and none of our money is actually going to improve the place. Straight into their pockets, but I digress.

Where is this?

 

[highland145]

See what small town USA her license will xfer to. My house+2 cars tax was $1K. I did pay for private school but I'm still ahead compared to you guys.

Bro in law moved from NY to WVa...$12k to $1700 tax. Granted WVa but they're in a nice area...same sized house but half the mortgage.

 

[Scarpozzi]

Look for income properties that need to be fixed up and do the work yourself to save money. Buy without the down payment if you can find a lender. Even with PMI, you'll get there quicker if you jump in with both feet.

Cut expenses like cable/internet and anything else that you don't really need... you're likely going to earn more the longer you work...

 

[JPS35]

Do you have student loans? If so, that's probably part of your problem.

Also, no offense at all, but if you have a financial adviser you're wasting money.

This..."Advanced degrees": how much did that cost to borrow? 50k? 60k? 80k? 100k? Are you in a field that has the earnings to pay that off in a timely manner?

Financial adviser: save more, pay less, don't borrow

Live in a more affordable area.

 

[Brainonska511]

This..."Advanced degrees": how much did that cost to borrow? 50k? 60k? 80k? 100k?

Speaking from experience, at least for a PhD, you generally pay nothing beyond a few years of indentured servitude (where you get a stipend enough to live off of with no need to pay tuition).

 

[Exterous]

Not gonna lie, I don’t know how you’re supposed to fit two car seats in some of these cars, and even small SUVs. Car seats these days are huge.

You can fit two car seats in civics these days. (The 2016 got pretty good reviews for 2 seats IIRC). If you can get two in a civic then a camry or accord should be just fine. And you can find a couple year old used one for way less than the SUVs people seem to think they need when they have kids. Sure it might not be someone's ideal situation but we get back to trade offs, especially earlier in life. What's more important to spend money on? Maybe it is the car. But let's be honest, it's more of a choice than many people make it out to be

 

[IndyColtsFan]

I don’t know what your advanced degrees are in or what their employment potential is, but in general, you shouldn’t go into massive debt for graduate degrees (there are a few exceptions, of course). Many companies offer partial or total reimbursement for degrees, and in the case of my wife’s degree, she took that partial reimbursement and paid the rest as she went, which was to a state school with a top 5 program in her area. Now obviously, degrees like MDs are going to require loans to get through, but people are foolish to go into debt for something like an MBA.

Regarding homes, I bought my first modest home in my 20s with 3%-5% down. Nine years later, I sold it and bought a much larger, nicer, and more expensive home with 20% down. The key here is that I live in a state with low cost of living but both the wife and I each make six figures. With remote work becoming more and more prevalent, it’s easier than ever to find a remote job and move to a low-cost area. I’ve worked from home full-time for 4 of the last 6 years and aside from being able to work for anyone in the world, it gives me a lot of extra time to get things done around the house rather than wasting 90 minutes going back and forth to work and wasting an hour at lunch doing nothing productive. When the weekend rolls around, I have very little (if any) “chores” to do and can relax.

And for those who snort at “flyover” country or Indiana (because I know it’s coming), have fun in your “houses” in NYC or SF which are smaller than my closet, look like crap, and cost 3 times what my house payment cost. When I go on one of my many vacations every year, I’ll make sure to point and laugh at you when I drive by . Seriously though, living outside of a major city means you have access to almost everything you need and I’m literally 10 minutes away from direct flights to NYC, the west coast, and Europe. Seriously consider it ziggy - your life will change dramatically for the better.

 

[Zeze]

By your 30's you should be making $100k plus each if you are both holding decent jobs. On a salary of $200k a year, you should be able to swing a house. You also had about 8 years of time to save up money to get some type of down payment.

Guys we are in 2019. Freakin' big mac combo with small fries and drink is $9.50~ in suburbs today.

'Six figures' and $100K salary was a big deal back in mid 90's. That's equivalent to 160K today due to inflation alone and possibly more since CoL has gone up terribly.

$100K is not a big deal and super common in non-coastal areal too (Atlanta, DWF, midwest). I just interviewed two people in their mid/late 20s in IT. One is a PM with minimal technical background, another is a full stack dev. Both have just 4-5 years of experience after undergrad.

We are offering them $95K/yr~ for both.

This is not a brag, period. You make $100-150K and just become a 'standard' home owner with 3-4 bed. Similar to what boomers have today.

'Six fig' prestige has been dead. My wife and i still use coupon codes.

This is tecg forum, you guys know this.

 

[s0me0nesmind1]

Honestly the more I think about it the more I think advanced degrees are worthless. The main exception being a a career where it's actually a full blown REQUIREMENT. E.g. Law school for lawyers, Doctorate for a doctor, etc.

Just knowing how far I've advanced in life, all I can say is networking and "who you know" will do FAR more than that degree will.

 

[Zeze]

I don’t know what your advanced degrees are in or what their employment potential is, but in general, you shouldn’t go into massive debt for graduate degrees (there are a few exceptions, of course). Many companies offer partial or total reimbursement for degrees, and in the case of my wife’s degree, she took that partial reimbursement and paid the rest as she went, which was to a state school with a top 5 program in her area. Now obviously, degrees like MDs are going to require loans to get through, but people are foolish to go into debt for something like an MBA.

Regarding homes, I bought my first modest home in my 20s with 3%-5% down. Nine years later, I sold it and bought a much larger, nicer, and more expensive home with 20% down. The key here is that I live in a state with low cost of living but both the wife and I each make six figures. With remote work becoming more and more prevalent, it’s easier than ever to find a remote job and move to a low-cost area. I’ve worked from home full-time for 4 of the last 6 years and aside from being able to work for anyone in the world, it gives me a lot of extra time to get things done around the house rather than wasting 90 minutes going back and forth to work and wasting an hour at lunch doing nothing productive. When the weekend rolls around, I have very little (if any) “chores” to do and can relax.

And for those who snort at “flyover” country or Indiana (because I know it’s coming), have fun in your “houses” in NYC or SF which are smaller than my closet, look like crap, and cost 3 times what my house payment cost. When I go on one of my many vacations every year, I’ll make sure to point and laugh at you when I drive by . Seriously though, living outside of a major city means you have access to almost everything you need and I’m literally 10 minutes away from direct flights to NYC, the west coast, and Europe. Seriously consider it ziggy - your life will change dramatically for the better.

I know this is getting bit personal for me. Being a minority is a factor too, especially today. There's so much racism in rural areas. Hell's there's racism in CA, SF, Mass, NYC - you just have to drive MERE 30 minutes out to the 'burbs.

And I gotta have my ethnic cuisine. I can't live in a true 'soul-less' suburbs that's built by mega property companies with usual pretty McD, Chipotle, Ruth's Steakhouse, and one crappy 'Asian' restaurant that serves entire Chinese/Korean/Japanese/Thai terribly.

 

[Zeze]

Honestly the more I think about it the more I think advanced degrees are worthless. The main exception being a a career where it's actually a full blown REQUIREMENT. E.g. Law school for lawyers, Doctorate for a doctor, etc.

Just knowing how far I've advanced in life, all I can say is networking and "who you know" will do FAR more than that degree will.

I know few friends who became lawyers. Tons of debt.

I barely graduated from a crappy state school with a worthless biz degree. Pivoted & self-studied my way into IT. Only had $12K of student loan that was paid off long ago.