Millennials, The Missing Participant in The San Diego Housing Recovery
Bloomberg recently published an article on the 13 cities where millennials cannot afford a home and you better believe San Diego came in high on the list. By taking the median home price and median income for each market they created this infographic below to show the shortages in each respective market.
California is home to six of those thirteen cities, four of which are deep into the five figure mark; San Jose (-$80,162), San Francisco (-$60,975), Los Angeles (-$45,761) and San Diego (-$36,084). What really becomes alarming is when you compare this to other markets included on this report. The California figures for these four cities is astronomical, this isn’t a case of working weekends and saving a little to make home ownership possible. These numbers are too great to make it even remotely possible for most millennials.
So what else, besides prices they can’t afford is causing Millennials to sit on the sidelines?
Flashbacks to 2008
Many of us entered the real world as the sky was falling. House prices and the stock market were dropping to the floor, people who we knew as responsible adults were losing their homes and there was no end in sight. Finding a job was brutal and this traumatic entrance to the real world has not been easily forgotten for many of us. This seems like a less severe version of our Grandparents who were forever stocking away items due to their childhoods during the great depression, we have found ourselves cautious with real estate.
Slow To Grow Up…
I am 32 years old, this year I have received more wedding invitations than ever. My facebook newsfeed is nothing but engagement photos and pregnancy shots. The pace at which millennials are growing up is stunted compared to previous generations. We are slower to graduate, enter the work force, get married, have children and purchase homes.
The norm seems to be entering marriage in your 30’s instead of your 20’s, the entire process of adulthood has shifted a decade and that might not be a bad thing but it lessens the demand for homes when an apartment will suffice.
Is Price the Only Factor?
Yes and no, simply put student loan debt has removed 8% of home buyers from the market since 2003. That’s before price is even factored into the equation, a huge portion of the home buyers in the largest group of the population (80 Million) are unable to participate in expensive markets.
Many people, myself included are expecting something large and ugly to come from the growing student loan debt. A bubble is predicted, the public awareness of the predatory lending methods via online institutions such as Phoenix University and Devry have many waking up to the financial burdens unfairly placed on students that will cripple their financial well being for decades to come. This could eliminate buyers for decades.
Are We Going To Ever Show Up?
The average age for a millennial is 27-28 years old. This generation is comprised of those born between 1980-1995, at 32 years old I’m one the older individuals in this range. I predict as the median age of our generation nears closer to the 30 year mark we will see an increase in interest in real estate ownership. There is little need to settle down and own a home until you are planning to start a family.
Until then, the demand for apartments and renting will far outpace that of buying a home for this market. If you take a glimpse into any metropolitan market, the endless construction of town homes and apartment buildings should be noted.
Can it Happen in California?
Not for everyone… yet
There will be interest in ownership but unless you are in an affordable market the average person will be priced out of home ownership in these key California markets. Without the assistance of family or creative methods, most millennials in these markets will not be financially capable of participating in home ownership.
A common statement by many of my friends is they intend to “wait it out until the next crash” as we entered into our careers we experienced this and history tells us it should happen again. There is a high expectation of this occurring again and it is when many of us hope to find out chance to enter the California real estate market.
Until then, perhaps some will cave in and opt for more affordable condos or moving into more affordable markets. Until then, we seem to be playing the waiting game on both sides.