Joy Abma, 23, and Dan Charnesky, 24, expected to rent an apartment after their wedding this spring.
But when they looked at the high rents — and the difficulty of finding a place that would take their three dogs — they decided to try to buy a home instead. "We had been saving for a very long time, so we ended up with enough money for a down payment," said Abma, a nurse who lives in Wyckoff.
After several months of looking, she and Charnesky, a landscaper, are to close on an Oakland split-level house this month. "We thought, 'We might as well do it while we're young,'" Abma said.
But buying a home when you're young is more difficult than ever. Thanks to high student debt, stricter mortgage standards and years of slow employment and income growth, people in their 20s and 30s have found it tough to get their first toehold in homeownership — and that's a problem for the whole real estate market. Without enough first-timers to jump-start a chain of purchases, homeowners can't trade up to their second and third homes.
First-timers may return to the market in greater numbers this year, however, according to some analysts, who point to low interest rates, a stronger job market and high rents, all of which make buying more attractive.
But in 2014, first-timers made up about 33% of buyers — the lowest share in nearly three decades, and well below the historic average of about 40%, according to a survey by the National Association of Realtors.
That weakness, the trade group said, prevented the market from reaching its "full potential" during the year.
A recent study by the Federal Reserve Bank of New York found that only 32% of 30-year-olds owned their homes in 2013, down from 44% in 2006-07, before the recession hit. The drop is especially notable among people with student debt, the New York Fed said.
The millennial generation is "not entering the housing market as purchasers or renters at anywhere near where prior cohorts have done," said Patrick O'Keefe, an economist with CohnReznick, an accounting firm in New York and Roseland. "One of the reasons is the soft job market, and relatively little income growth for those who have jobs." In addition, he said, they're "burdened with significant debt, primarily student debt."
Nationally, student debt now totals about $1.1 trillion — a number that tripled in just a decade, between 2003 and 2013. As a result, O'Keefe said, "their ability to afford independent housing is severely constrained."
Lawrence Yun, NAR's chief economist, made a similar point.
"Rising rents and repaying student loan debt make saving for a down payment more difficult, especially for young adults who've experienced limited job prospects and flat wage growth since entering the workforce," he said.
Yun, however, predicted that a stronger job market and the introduction of low-down-payment mortgage programs would bring more young buyers into the market this year.
Analysts have speculated that many millennials are delaying home purchases by choice — out of a desire for more flexibility, an urban lifestyle and a concern that home values could drop again, as they did in the real estate crash.
But recent research suggests that young adults would be very interested in homeownership — if they could afford it. A recent survey of people age 18 to 29 by the Demand Institute, which studies consumer demand around the world, found that 24% already owned their homes, and 60% plan to buy someday. And three in four believe ownership is an excellent investment. But 44% think it will be difficult to qualify for a mortgage.
Interviews with several recent first-time buyers turned up a few common threads, including a lack of student debt. And the buyers were able to start working and saving at an early age. Abma and Charnesky were able to get jobs in their family's businesses starting in high school — Charnesky in his brother's landscaping company and Abma at her family's Abma Farm and Market in Wyckoff.
Similarly, Michael Kusnir, who grew up in New Milford and just bought a $295,000 condo at the M in Englewood, works in his family's elevator-inspection business. He knows he was fortunate to have that job opportunity.
"I got lucky with my family company," said Kusnir, 24, who is engaged to his high school sweetheart. "I know friends who just graduated college, they just can't get a job."
And all three learned the value of saving, from a young age.
The Habit Of Saving
"We were raised to save so you could get important things," Abma said. "My parents said, 'You can have fun in life, but there are things that, as you grow up, you are responsible for.'"
"I would save 25% of every paycheck," Kusnir said. "It goes right into a savings account. I forgot I even had that money. Any bonus or gift, I'd throw it in the bank. If I didn't save, I'd still be renting another 10 years. Saving money has always been something my father taught me, and honestly, it was one of the best things."
In addition, Abma, Charnesky and Kusnir didn't take on student debt for college — thanks to tuition help from parents, part-time jobs, choosing state schools, or a combination of all three.
Down-payment help from parents is often crucial to a first-time buyer. Kusnir got that assistance, and so did Eleanor Contreras, 38, who recently bought a Cape Cod in Bergenfield for $283,000.
To afford her monthly payments, she also works two jobs, as an event coordinator for the Bergen County Division of Senior Services and as co-director of the before- and after-school programs in Bergenfield.
Contreras shopped for houses for more than a year. In her price range, she "walked into some scary houses."
"What people consider bedrooms are more like closets," she said. And many needed extensive work — though the house she ultimately bought was in decent shape, with an outdated but not disastrous kitchen.
Contreras is happy to be an owner after five years of renting.
"Knowing that I was putting money toward something that wasn't mine really is what motivated me," she said. "I wanted something of my own."
Helping the Market
More first-time buyers may soon know that feeling. Realtor.com, a real estate search site run by the National Association of Realtors, recently declared 2015 the year of the first-time buyers, predicting that as more people in their 20s and 30s find jobs, they'll be able to buy homes.
That would likely help the entire market.
"First-time buyers are incredibly significant to the market, because if nobody buys that first home, the families in those houses can't move up to the next level," said Maryanne Elsaesser, a Coldwell Banker agent in Wyckoff who helped Abma and Charnesky find their home.
Roberta Whitley Gomez of Whitley Realty in New Milford said that low mortgage rates and rising rents have been strong incentives for the first-time buyers she has worked with.
"I think the monthly payment can sometimes be less if you purchase a house than if you rent," she said.
"The first-time buyers seem to be very determined. No matter what, they're getting into this house."
Sam Khater, an economist at the real estate information firm CoreLogic, said first-time sales might get a boost from recent strong job growth among 25-to-29-year-olds. Stephanie Karol, an economist with IHS Global Insight, predicted that more than a million households will be formed this year, a rate that should fuel housing demand.
But O'Keefe remained skeptical that young adults will overcome student debt and slow income growth.
"To project that at some time the millennials become a much more significant demographic factor is to wish away their lack of employment power and their debt overhang," he said. "I don't see it."
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