Millennials: The Struggle to Enter Real Estate Market [AUDIO]
In part three of a five-part series, “Millennials,” we examine how an expensive New Jersey real estate market and student loan debt is keeping some millennials from buying their first home.
Homeownership is a quintessential part of the American Dream but many millennials are finding it out of reach as they face crippling student loans, a difficult job market, and one the most expensive real estate markets in the country.
While the housing bubble burst, leaving record low real estate costs coupled with equally low interest rate; the relatively low salaries and tens of thousands in student loans mean many young people won’t get to take advantage of the market said Peter Reinhart, director of the Kislak Real Estate Institute at Monmouth University.
Reinhart said banks and lenders are weary of giving out mortgages, especially to individuals with no other collateral.
“One of the hangover effects from the easy credit era of the early 2000s that is partly to blame for the recession that we had,” Reinhart said.
He added while many Baby Boomers and Gen Xers got help from their parents in buying a first home, many millennials won’t have that luxury as the 2008 recession killed the equity of the homes of many baby boomers.
“So their ability to take funds, either through a home equity loan or something like that and provide that down payment assistance to their children is significantly impacted.”
An additional problem is New Jersey’s housing market is fundamentally not appealing to many young people according to Reinhart. He notes while the state is dotted with many suburban communities filled with single family home on individual lots, while many young people are looking for more practical housing options.
“It’s more about the location with more recreation, culture, walkability, livability, are the big terms being used,” said Reinhart.
He noted many young people would rather rent an apartment in hotspots like Asbury Park, Hoboken, or Jersey City rather than buy a home elsewhere.
However, cost is still the largest mitigating factor for many millennials. Kaitlin Deitz, 27, of Tinton Falls, works six days a week as a counselor but is still forced to live with her parents because her job doesn’t pay enough to move out.
“I saw 27 as the house, white picket fence, a family. I’m single, working and I really can’t afford to live by myself. I’ve done the budget, there’s no room,” Deitz said.
“Not only is rent not cheap in New Jersey but most of the jobs are up North, so if I wanted to live in South Jersey I could live on my own but I would be commuting two hours each way so that wouldn’t be feasible,” said Che Blackwood, 25, of Spring Lake Heights who can’t afford to move out on her own either.
While Reinhart is confident the market will eventually correct itself, and predicts many millennials will eventually become homeowners; the current delays are having impacts.
He explained traditionally first time home buyers buy their home from ‘move up’ buyers looking to upgrade their homes, however the current delays throws a wrench in the cycle.
“To the extent we’re going to have fewer of the millennials becoming that first time buyer, it’s going to inhibit the ‘move up’ buyer from continuing the process,” Reinhart said.