News outlets abound with tales of generations in distress. Millennials are moving back in with parents at record rates; Gen Z will never be able to afford a home, and do the Alphas even stand a chance?
Many of us may blow the news off as sensational reporting. It’s easy to find a struggling millennial and cherry-pick their story or twist statistics to tell the story you want to tell.
When you want the truth, you must go where the people are. One user went to Reddit to find out the real scoop. They sought out one of Reddit’s most popular communities, featuring nearly 40 million members, and asked millennials and Gen Z (Reddit’s largest demographic) to share the reality of the situation.
“This is for the Gen Z and Millennials,” the user began. “How hard is it for you to buy a home?” they asked.
It’s Not Happening
Vitaliy Abbasov via Shutterstock.com.
Many users responded negatively, saying they have no hope of ever owning their own home.
“The only way I can afford to have a home at this point is if I buy raw land, harvest, and process the trees to build it myself,” said one, receiving 1000 upvotes for their brutal honesty.
“It’s genuinely not a realistic goal for people who are making an average wage and not married or receiving down payment from a family member,” replied another.
“I prefer a realistic dream, like going to Narnia through my closet,” snarked another, earning the starry award and over 2.5 thousand upvotes.
The Process Works Against Us
Some shared that they can easily afford a mortgage payment, but other parts of the process prohibit them from owning a home.
“I can afford the month-to-month mortgage. I cannot, however, afford a downpayment,” shared one user.
Downpayments are tough. You need to save up approximately 20% of the loan value for a conventional loan. The average home price in the US is close to $350,000, which means anyone who wants to qualify for a conventional loan would need to save a whopping $70,000, a challenging feat for anyone.
The US has programs available to help citizens attain homeownership. Many can opt for Federal Housing Authority (FHA) loans, which only require a 2.5% downpayment. Still, on a $350,000 house, they’d have to save nearly $10,000, which isn’t as hard, but still a challenge considering most Americans don’t have $1000 for an emergency.
Even at that, FHA loans come with higher overall costs, as borrowers must pay Primary Mortgage Insurance (PMI) to reduce the lender’s risk.
Mortgage Lenders are Too Picky
Some shared that they can easily afford their rent payments, but mortgage companies still deny them for loans even though the mortgage would be less than their rent.
“I can afford to pay 10,000$ a year on rent but the bank doesn’t think I can afford 7,000$ a year mortgage.” said one user, befuddled that lenders don’t look at the whole situation.
Others explained the risk the lender takes on, to showcase why mortgage companies may deny loans applicants think they can afford.
“The HUGE difference is the risk taken by the bank vs the landlord,” replied another Redditor. “Landlord risk if you do not pay-kick you out and find someone who will. 12 months lease. Bank risk-15-30 year mortgage ~$200,000 or more. All the possibilities for you to default within 15-30 years.”
Exploding Prices Put Homeownership Out of Reach
Other users lamented skyrocketed housing costs, saying that rising rents and exploding home prices put ownership out of reach.
“My parents houses mortgage is like half of rent in my area. I can afford that and probably most of the utilities and such by myself. That being said, the price of the house has almost tripled in value since they bought it. I could probably swing the down payment by myself but would definitely make me uncomfortable,” replied one user.
The user hit on the two most significant challenges facing millennials – high rent payments and higher home costs.
Another gave an example of how challenging the housing market is for their son but how easy it was for them.
“Wife and I bought our home in 1998 when our first child was born. The house sold for $105k, and we put $10k down,” they began.
The user shared that it appraised at $180k in 2017, even though they didn’t put any work into it. They then completed some minor updates and repairs, and the house was appraised at $290k in 2021, with a few in the neighborhood selling for above 300k.
They finished by describing the current situation their son faces. “Banks here are requiring 30% down for new buyers right now. For my oldest son, that is two years out of college, he would have to provide a down payment that is nearly as much as we bought the house for 25 years ago.”
Some Millennials Got In Before The Hype
“We bought one in 2014 with an FHA loan. Only out-of-pocket costs were $500 for due diligence and around 2k for the lawyer. We’ve refi’d a few times, and our mortgage will be just under $1300 later this year when our taxes go up,” shared one user.
“Elder Millennial here,” added another. “I bought in 2018. Had no cash in hand. Utilized a program from my lender for low/moderate income buyers (not me) or those buying in low/moderate income zones (me) that required only 5% down. Took a 401(k) loan for the down payment/closing costs.”
Many users commented that getting in before 2020 was a real blessing. The users who were old enough and financially stable enough to buy before housing exploded lucked out.
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Others Made It Work in the Past Few Years
“I just bought a home. I needed 50k down payment to do it. I won’t go into details about how I got that 50k, but I can damn sure guarantee the average millennial/gen z doesn’t have 50k to drop,” replied another, very well aware that most don’t have the financial means they do.
“It was super hard saving up,” shared one. “We aimed to buy a cheap place first just to get onto the ladder. At least that way, we were building equity as opposed to paying rent.” The user didn’t share whether they purchased before the huge boom in prices that started in 2020.
“Very young millennial/early Gen Z,” responded one young Redditor. “I got a condo for $150k in a decent location. Average per capita income is $51k, 3% poverty rate for some general metrics. Bought in 2021. It was a lot of hunting, and the house is two bedroom, but everything is spacious. It’s by no means a beautiful house, but it’s not run down, either. Down payment wasn’t too bad for me, there are ways to incorporate it into the loan.”
Location Location Location
Others shared that it may be impossible to buy a home in “hot” markets, but many places in the States are still affordable.
“Houses aren’t very expensive in Central Pa (around 200k average), so more realistic to own a home here than in some states,” replied one user.
Of course, the problem is the places with lower housing costs tend to have lower wages and less available jobs, which makes it hard for folks to move to those areas.
Housing Continues to Be a Problem
Most young Redditors agreed that the skyrocketing cost of housing, rent, and living in general are causing massive problems for the younger generations.
Rising costs of living, student loans, and low wages combine to make growing up and leaving the nest a challenge for many.
What do you think can be done to help these struggling generations?