Co-Buying: A Solution for Buyers
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Photo by Dylan Fout on Unsplash
I’m not going to focus on the generation getting written about the most. You know them, you may be one of them. Millennials. Realtor.com and Movement.com both just published articles about Them and Their house buying challenges, along with a fantastic solution: Co-Buying a House! About 4% of first-time buyers purchased homes with housemates from July 2018 through June 2019, according to data from the National Association of REALTORS®. That is double the percentage from a year ago.
Jessica Lautz, NAR’s vice president of research, said “There’s a lot of people who are looking at homes today and saying, ‘I can’t afford this by myself. I’m [on a] single income. How can I get into a house?’ Finding someone who’s renting currently and matches your ideal [co-buyer profile] sounds like a great idea. Why not have a stable home and gain equity at the same time?”
Currently co-buying is an expensive city trend, but the trend will likely gain momentum as more of That Generation buys homes throughout the country.
I’ve worked with Co-Buying Clients for many years, here are my top tips:
Meet with an attorney to draw up an agreement about what will happen if/when you no longer want to co-own together. One buys from the other, house get’s sold and you split the proceeds, it get’s turned into a rental and you split the rent proceeds.
Make a budget, and a home care plan. Who is in charge of the yard? Minor home repairs? Picking the living room color? The more you discuss up front, the better the relationships will stay.
Decide what you will tell other friends and family. Money may not be any of their business, but get on the same page about how much you will share, and with whom.
That Generation is not buying houses at the same rate or for the same reasons as older generations, and here are real economic data behind these trends. Here’s a few interesting data points that will help you better understand this group of borrowers:
Millennials aren’t working like previous generations. A lower share of young adults are working today compared to the year 2000. The male labor force participation rate has dropped to 88.8 percent from 93.4 percent. Females have dropped to 74.5 percent from 76.1.
Student loan debt is troubling. Americans owe more than $1.2 trillion in student debt, and much of that is owed by Millennials. One recent survey revealed 63 percent of these young adults have more than $10,000 in student debt.
This combination of lower employment and higher debt, combined with a societal shift to marriage and children later in life, have slowed the pace of household formations. About 15 percent of young adults age 25-34 still live with their parents today, compared to 10 percent of that age group in the year 2000.
Housing costs are higher today, especially compared to wages. House prices, adjusted for inflation, have increased 29 percent since 2000, but real incomes are only up about 1 percent, according to Freddie Mac research. Freddie Mac estimates almost 50 percent of the home ownership gap in this generation is caused by high housing costs. About 700,000 young adults did not buy a home between 2000 and 2016 because of increases in inflation-adjusted home prices and rents.
When you are ready to Co-Buy contact me, I would love to walk you and your co-owners as clients!
Sources: Realtor.com, Movement.com