In our three-part special report, Money On Our Minds, 草莓传媒 takes a close look at the financial situation of millennials in the D.C. area and how they make ends meet, with a focus on student loan debt, homeownership and retirement planning.
WASHINGTON 鈥� Millennial homeownership is growing. People age 37 and younger made up the largest share of homebuyers in 2017 at 36 percent, according to .
For 65 percent of those buyers, it was their first home.
But for many millennials in the D.C. area, there are a number of barriers holding back their homebuying process, such as student loan debt, an inability to make the down payment, and overall affordability issues in an increasingly expensive housing market.
D.C. couple Vonetta Young, 32, and Rustin Brown, 34, became homeowners last year when they bought their Shaw condo, moving back into the District from New York City.
Though Brown had grown up in Howard County, Maryland, and his parents were real estate agents, he and Young didn鈥檛 realize how competitive the D.C. market was until they were going through the process.
鈥淣either one of us was expecting for bidding wars to take prices so much higher than the list price. I mean, we were seeing things that were easily going for $70,000, almost $100,000, over the list price,鈥� Young said.
D.C. has seen a population boom in the last 10 years, and the bulk of that growth moving into the area, said Yesim Sayin Taylor, executive director of the D.C. Policy Center.
In D.C.鈥檚 tight housing market, she said, that means with lower-income families when it comes to homeownership.
Well-off baby boomers who have sold their homes in the suburbs to move into the District are also competing, said Dawn Leijon with American University鈥檚 Kogod School of Business.
鈥淪o now you have poor millennials looking for a place to live and they鈥檙e competing with people who鈥檝e just sold a house for $1 million in Potomac and they have the cash to buy some luxury thing,鈥� Leijon said. 鈥淭here鈥檚 a lot more demand than there was 30 years ago.鈥�
Student loan debt
For millennials who have bought homes, around 53 percent said having student loan debt delayed their ability to save for a home purchase for several years, according to the NAR report. Overall, 46 percent of millennial homebuyers have student loan debt, the most compared with other generations.
When Young and Brown bought their condo, they had at least $130,000 of student loans to repay between them, from business school and law school, respectively. Young is a writer who previously worked in private equity; Brown works as a corporate lawyer.
Young said that while they had whittled down their student loan debt, they hadn鈥檛 made as much progress as they thought they would because of New York鈥檚 high cost of living.
She isn鈥檛 too worried about their student loan debt, though. 鈥淚 think we have this idea that we have to have one loan at a time, either student loans or a mortgage, and that鈥檚 not necessarily true and winds up being a disadvantage at the end of the day because you鈥檙e not building,鈥� she said.
鈥淵ou鈥檙e sort of sinking yourself out of a hole, but not actually building a platform for you to stand on when you鈥檙e out of it.鈥�
While student loan debt can be a barrier to buying a home, Arlington Homeownership Program Administrator Akeria Brown said that hasn鈥檛 stopped people from applying for her county鈥檚 first-time homebuyer programs.
鈥淲e do see a lot of student loan debt, and we tell people to just make sure they鈥檙e paying on a monthly basis, that they are not in deferment, that they鈥檙e not in default of those student loans, and those student loans do, in a lot of cases, count toward their debt ratio,鈥� she said.
Help for first-time homebuyers
For millennials who are interested in buying a home, there are a wealth of federal, state and local first-time homebuyer programs that can help finance their purchases.
The Virginia Housing Development Authority offers a and a , and are available online and in person.
础谤濒颈苍驳迟辞苍鈥檚 provides a deferred-payment, no-interest loan that serves as a second mortgage that can cover a part of the down payment and all closing costs. And Fairfax County offers for those who meet certain income thresholds.
Maryland has , such as 30-year fixed-rate loans and a 鈥� aimed especially at homebuyers with student loan debt.
Montgomery County homebuyers can get a loan for down payment assistance. And Prince George鈥檚 County offers .
In D.C., there are programs to help with down payment and closing costs: and the .
Akeria Brown said 础谤濒颈苍驳迟辞苍鈥檚 programs are a 鈥渟topgap鈥� for people wanting to own a home in the county.
鈥淲e believe in homeownership not just for the wealthy but for the moderate-income household that can contribute to this community in various ways and will build this community for the long term,鈥� she said.
‘Big wealth divide’: Unequal down payment access
Many times, those millennials who are able to enter into homeownership are more likely to have friends and family help with their down payment for a house than past generations, said Jessica Lautz, director of demographics and behavioral insights at the National Association of Realtors.
鈥淎nd that is a huge difference. It鈥檚 creating a pretty big wealth divide between those who can get into homeownership and those who can鈥檛,鈥� Lautz said.
There鈥檚 an interesting dynamic happening where more than one-third of first-time homebuyers had help from family to enter homeownership, such as getting a gift or loan for a down payment, Lautz said.
Living at home with family for a period of time is also helping millennials save money.
鈥淚f you鈥檙e able to live at home with your parents and pay down on your debt, that鈥檚 going to give you a leg up, and there鈥檚 a lot of families out there who can鈥檛 do that, who can鈥檛 help financially to have that transfer for that down payment or to have the room to house someone over the age of 18,鈥� Lautz said.
D.C.-area real estate agent Eli Tucker often works with millennial clients and noted that millennials who are able to put 10 to 20 percent down are getting gifts from parents.
鈥淚 think it鈥檚 really important for people to understand that the 20 percent mark, most people are not going to be able to hit that 20 percent mark until at the very least their mid-to-late 30s,鈥� he said.
Tucker said family contributions are also occurring because parents see value in investing in D.C.鈥檚 market for its relatively stable economy.
鈥淕enerational wealth lives in the D.C. area,鈥� he said. 鈥淭o truly build wealth in America, with a moderate income, real estate ownership, in some ways, is one of the most important means of getting there.鈥�
Rustin Brown stressed that even though his parents were able to put him and his siblings through private colleges, he doesn鈥檛 expect them to have a legacy or pass down a lot of wealth. He said he and his siblings are largely on their own financially.
But generational wealth has helped others greatly, he said, Some of his friends had parents who could help with down payments. And for those who didn鈥檛 have that assistance, 鈥測ou鈥檙e behind the eight-ball, no matter how much money you have,鈥� he said.
It took Brown and Young five years of marriage before they could save enough money for a 5 percent down payment.
鈥淭here鈥檚 a lot of people who will continue to be left behind, and the gaps will continue to be more and more spread out, just because of the way the system is, and the system is getting worse and worse, even though people have better and better intentions,鈥� he said.
Racial disparities in homeownership
A major cornerstone of building wealth for middle-class families is traditionally through homeownership. But due to and , particularly African-American households, a large racial wealth gap persists in the U.S.
, median wealth for white families, $134,230, is almost 12 times higher than median wealth for black families, $11,030.
D.C.-based writer Mel Jones about how black millennials are often expected to provide for their families and rely less on family help with expenses: 鈥淭he gap in gifts, debts and inheritances creates a vicious cycle with large ramifications for many black millennials and their financial future 鈥� and when combined with redlining and unequal returns on income and education, the odds are stacked in a terrible way.鈥�
Fifty years after the , black homeownership rates are still the at 41 percent in 2016, taking a dip after the 2008 recession. Those rates fell particularly for younger members. White homeownership rates were the highest at 71 percent, rebounding close to pre-recession levels.
Since the 1980s, Taylor said D.C. has seen a large suburbanization of its black population. The city’s black population has decreased dramatically since . By 2015, only 48.3 percent of D.C. residents were black.
The District has not done well to accommodate residents of varying income levels, she added. In fact,听“economic segregation in the city has increased, actually,鈥� Taylor said.
Prices on U Street, D.C.’s historic black neighborhood, soared above $900,000, with next door in Shaw going upward of $770,000.听 using data from data analytics company Black Knight. Median sale price for homes east of the Anacostia River were still below $350,000.
D.C. native Lauren Grimes bought her first home in Marshall Heights for less than $200,000 in 2015. The 29-year-old had always wanted to own a home, and she had lived east of the river for much of her life.
鈥淏oth sides, paternal and maternal, they own property in D.C. But I noticed 鈥� I don鈥檛 know how early on, but at least in my 20s 鈥� how the environment in the city was changing,鈥� said Grimes, who works as a program analyst in foreign policy.
She said she didn鈥檛 want to be pushed out of the market completely and had help from a family friend who is a realtor in her search for a home.
Grimes didn鈥檛 use any of the local housing programs for first-time homebuyers, and said she was able to get a conventional loan because of her good credit score. If she had gone through with HPAP or other first-time homebuyer programs, she said she would have lost the chance to lock down the house because of the time it takes to get through those programs.
鈥淢y ultimate goal was to be able to have property here in D.C., and I accomplished that. So I can鈥檛 really complain about anything else,鈥� she said.
Though she鈥檚 juggling her mortgage, student loans from graduate school, homeowner鈥檚 insurance and multiple utility bills, she said she isn鈥檛 living paycheck-to-paycheck and even meets with a financial adviser to help with her investments.
鈥淚 made a lot of sacrifices as a young person, but I know it鈥檚 going to be worth it later on in life,鈥� she said. 鈥淲e live in this capitalist society, and it鈥檚 hurting my people. It鈥檚 hurting black and brown people all over the U.S. And I don鈥檛 want to be caught up in that. So maybe I was subconsciously aware of that factor.鈥�
But Grimes understands that just like going to college, owning a home isn鈥檛 for everyone.
鈥淵ou have to consider what is best for you,鈥� she said. 鈥淧lan ahead and do as much research as possible. There are so many different programs out there to help people purchase homes. There are so many opportunities to be a homeowner if you want to.鈥�
Talking to people who have owned homes for a while, Grimes said, also helps. 鈥淚 think there鈥檚 a lot we can learn from older residents in the city. They鈥檝e watched the city change longer than we have.鈥�
But in the end, she鈥檚 happy she became a homeowner after going from apartment to apartment.
鈥淚鈥檓 glad I found this house, because now I feel like I have a safe haven. Not like I wasn鈥檛 safe before, but this is what I鈥檝e always wanted. And I didn鈥檛 know that,鈥� Grimes said.听鈥淚t鈥檚 nice having a home and just feeling at home. Like, this is mine.鈥�
More from the series ‘Money On Our Minds’:
- Part 1: Millennials attempt to stay afloat amid student loan debt
- Part 3: 鈥業 don鈥檛 know if what I鈥檓 doing is right鈥�: Millennials face barriers to retirement planning
