Millennials Collaborating to Attain the Dream of Homeownership
The affordability issues in the housing market aren't going away for younger buyers. The financial challenges hindering millennial homeownership have been well documented, between overwhelming student loan debt and record-level home prices. However, some within the cohort are carving their own path to the American dream through teamwork.
"Affordability is a key issue for young buyers or first-time homebuyers entering a market with limited inventory, so pooling incomes with a roommate becomes a really good solution for many buyers," says Jessica Lautz, Vice President of Demographics and Behavioral Insights for the National Association of REALTORS®
Like other market trends, the pandemic accelerated things, according to Lautz, who also suggests that declining marriage rates among younger generations have contributed.
The generational lull in nuptials hasn't kept buyers, particularly millennials, from pursuing homeownership, however. Based on NAR's recently released 2021 Profile of Home Buyers and Sellers report
, for the third consecutive year, unmarried couples that purchased a home accounted for 9 percent of the buyer pool.
According to NAR's data, the share of first-time buyers who were unmarried couples rose slightly to 17 percent.
Navigating the Trend
While co-buying isn't a novel concept in real estate, experts and agents state that it's a worthwhile trend to keep an eye on.
Along with working as an agent, Nicholas Ritacco is also a co-buyer. The New York-based agent teamed up with his roommate to buy their first home during the pandemic, to escape renting.
Looking at the numbers, Ritacco says low mortgage rates since 2008—and record lows during the pandemic—presented an opportunity to finally tap into homeownership while living in or near more major metro areas.
"The affordability is in our favor, and it is time-sensitive. Whether it's two, three or five years down the line, no one can predict, but I can tell you every point we go up is pricing somebody out," he says.
Compared with traditional buyer scenarios, Lautz suggests that agents work with their co-buying clients to identify long-term intentions for the property they are looking to buy and how they will address any life changes.
"If someone gets a job on the other side of the country, are you going to rent the room that the roommate has been living in?" Lautz asks.
Discussion over income between the clients is also essential, as Lautz notes that will become an issue when it comes time to divvy up the down payment and closing costs in very similar ways, so they are earning equity in the same way.
Having gone through it himself, Ritacco says that he also started working with friends that want to partner up to buy a home.
Part of his guidance involves helping his clients identify their "exit strategy" before going into a co-buying partnership. This typically involves determining how long they intend to live in the property and how they want to approach selling or renting it out when one or more parties is ready to move.
"You have to understand what your options are and what your rights are," he says, noting that he gets "granular" with his clients when working out the details so that each party is comfortable entering into the deal from the beginning.
While the trend of co-buying opens doors to homeownership, it's not without its challenges, which is why agents say that they encourage their clients in co-buying situations to speak with legal experts.
Real estate attorney Edwin Farrow recommends hashing things out in writing before closing on a home when it comes to co-buying partnerships.
"What they've done is create a partnership, and partnerships can go bad," Farrow says. "You need to know what happens in the event the partnership is dissolved, keeping in mind the fact that the bank doesn't care that you're friends and agreed to whatever you agreed to."
Farrow's co-buying clientele typically consists of unmarried couples and family members teaming up to buy homes together. He indicates that getting a better understanding of the risks and benefits of teaming up to buy a property together is vital for any buyers looking to take this route toward homeownership.
A joint tenancy with the right of survivorship is another route. Each partner owns the whole property together, and the last of them to die would keep everything.
Adpated from an article published by RISMedia. Jordan Grice is RISMedia's associate online editor. Email him your real estate news ideas to email@example.com.
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