Turtle Creek Gardens’ peaceful pool

Homeownership is the most consistent way to build up the nest egg you’ll need in retirement. People who downsize their homes are cashing out equity built up over a lifetime (and telling the kids they’re on their own). Sure, there are many reports that claim folks who rent in some areas make out better. But they’re always predicated on the renter investing the difference between the rent and the mortgage/taxes – which almost no one does. Instead, flush renters eat out more, buy more shoes (or in my case, shirts) or wend their way around the world collecting selfies.

The increased incidence of renters is troubling in many countries. When I spoke to HGTV presenter Richard Blanco in London recently, he agreed it would have an impact on tenants later in life. While student loans are an issue here, the issue both countries shared was a desire by younger people to live a catered life (as they did with mom and dad) where they farmed out the reality of living.

For those smart enough to embrace property ownership, the down payment is often a stumbling block for younger buyers. So without living in your Star Wars-decorated childhood bedroom, how does a potential homebuyer save? Especially when Uptown digs can scrape $3 per square foot per month?

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JCHS tabulations of Federal Reserve Board, Survey of Consumer Finances.

In Texas, the average debt is $26,292 and 56 percent of residents hold student loan debt. But one company found a way to make it go away faster.

In 1995, about a quarter of adults aged 20-29 had student loan debt. In 2016, it had increased to 47 percent. The percentage who had less than $10,000 went from 16 to 12 percent, while those owing $10,000 to $24,999 rose from 8 percent to 15 percent. Former students owing $25,000 to $49,999 also jumped from two percent to 12 percent and those owing over $50,000 from one percent to eight.

We also know that it takes the average college-educated person with student loan debt until around age 35 to reach the homeownership rates of their peers without debt. Student loan debt is one of the biggest reasons the Millennial generation took so long to purchase a home. And what about Generation Z, whose oldest have just drank their first legal beer while waiting for their even larger student loans to come due?

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Plenty of data has shown that Millennials have been eschewing homeownership more than previous generations. That trend may now be reversing according to data from HomeLight, a company that utilizes complex data analysis to better understand real estate markets across the country.

“Millennial is a broad term, but when we look at our data, we are seeing more homebuyers in their thirties,” HomeLight spokesperson Matthew Proctor said. “That’s a lag compared with Baby Boomers and other generations who were buying closer to age 26 or 27.”

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Millennial Homebuyers

Nationally, about half of American homebuyers are under 36, according to the latest study on consumer trends from Zillow, putting them squarely in the Millennial camp, born from the early 1980s to the early 2000s.

Mail surveys from the National Association of Realtors indicate that first timers account for about 32 percent of all buyers, and Dallas Builders Association member builders ranked Millennials behind Generation X and Baby Boomers as their most common buyer in a recent survey.

The contrasting studies may be related to the methodology, but the Zillow study provides optimism about Millennial homebuyers.

Millennials have been slow to buy their first house—housing economists call this “delayed household formation” and cite it among Millennials as one of the biggest reasons we saw a slow housing recovery nationwide.

According to the National Association of Home Builders, 65 percent of Millennials hope to buy a single-family home. But this age cohort experienced the largest decline in homeownership rates since 2006. In fact, only 34.1 percent of Millennials own a home, down from 39 percent in the second quarter of 2010, according to the most recent U.S. Census Bureau’s Housing Vacancy Survey, which reported data from 2010 to 2016. A recent Pew Research Study further shows 32 percent of Millennials still live with their parents.

How do Millennial homebuyers fare in DFW? We’re experiencing record growth and are on track to add more than 100,000 jobs this year, causing price increases, especially for new homes. The median closing price for a new detached home in the Dallas-Fort Worth region increased 5.4 percent year-over-year to $305,637 in August, compared to the median closing price for an existing detached home, which is now $217,360.

“Market demand, increasing local regulations, and an ongoing labor shortage are all reasons why the average new home is more than $88,000 more expensive than the average existing home,” said Dallas Builders Association Executive Officer Phil Crone. “Obviously, that kind of premium is going to make it difficult for most first-time homebuyers to step into the new home market. We need to ensure our market and our industry meets the needs of Millennials as they hold the key to our region’s continued prosperity.”

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millennials renting

Photo: Billingsley Company

We’ve all heard the sad story of Millennials living with their parents, drowning in student debt, and working at Starbucks with liberal arts degrees.

While part of that image is accurate for a percentage of the U.S. population—a recent Pew Research Study showed 32 percent of Millennials do live with the folks—a larger percentage of those 18 to 34 years old live independently (48 percent). And a lot of them are renting.

Millennials are often drawn toward renting versus buying, in part because of that student loan debt. They also like the flexibility of being able to take advantage of new economic opportunities by not being tethered to a mortgage. These are free spirits.

“For Millennials, life is about experience over ownership,” said Sumner Billingsley, a managing partner of The Brickyard in Farmers Branch. “Thoughtfully designed apartments and rental townhomes give [them] the ability to enjoy creative and unique design elements that are typically reserved for single family homes, but at a budget [they] can afford.”

So what are the top five considerations of today’s Millennial looking for a temporary dwelling? The Billingsley Company did some research and came up with a list.

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East Dallas has a high density of parks and public spaces: White Rock Lake, the Dallas Arboretum, and Flag Pole Hill, the dog park, as well as the myriad trails and scenic routes that wind through the neighborhoods of Lakewood and Lake Highlands.

All of these reasons make this area prime for Pokemon hunters.

With the augmented reality app Pokemon Go sweeping the nation, homebuyers from Team Valor may find it beneficial to move to East Dallas. However, downtown isn’t exactly slim pickings, either (are you listening, Team Mystic?). Truth: We can’t hate on this fad, as it’s helping people connect, making people go outside and get some fresh air and exercise, and also creating a new marketing opportunity for small business — and real estate, of course!

In fact, some small businesses are seeing a serious boost in sales. In some cases, Realtors are using Pokestops, gyms, and rare Pokemon sightings as ways to attract Millennial homebuyers to open houses:

Pokestop MLS

But how do you take advantage of Pokemon Go to draw in more traffic and boost your sales?

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Lombardy lane ArlingtonDid your parents help you buy your first house? I know that down payment money is not supposed to be “borrowed,” but it can be a cash gift.

Of course, with a Fannie Mae loan, you can put down as little as 3 percent for a down payment, but there are strict limits on the prices of properties.  I think this cute $165,000 1950s ranch in Westwood, Arlington would work. The giant mortgage service company that is publicly traded but also quasi owned by the Federal government went on a quest to find out what kind of assistance young adults get from their parents, and how that assistance impacts their likelihood of buying a home.

We are all bemoaning the drop in homeownership among young adults: since the Real Estate bust, homeownership rates of households headed by 25- to 34-year-olds has fallen by nearly 10 percent, to 36.9 percent in 2014, when it was almost 46 percent in 2006.Lombardy lane Arlington.jpg kitchen

Of course, 2006 was the era of easy peasy money, no income documentation loans, etc. It clearly helped young home buyers.

So do kids buy more real estate if mom and dad make it easier to get a loan because they help with the down payment?

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More often, home is where the degree is

More often, home is where the degree is.

Long ago I was told that it’s more lucrative to be paid to think than to do. Turns out that piece of advice is true on many levels that intersect with homeownership.

Several years ago, the Federal Reserve Bank of New York released data that seemed to say that student loan debt was dragging down homeownership rates among younger buyers. It’s a belief that persists.

At first blush, it makes sense.  If you have more debt, you have less to spend on housing because your debt-to-earnings ratio was weakened.  However, new research is blowing a hole in that homily. It seems that when corrected for education, it’s not debt that’s holding back homeownership rates, it’s education itself.

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