Timothy Nwachukwu, Special to the Denver Post
Google avocado-toast restaurants, squeeze into some skinny jeans and be prepared to embrace any number of other clichés about millennials, home real estate pros. They’re going to be your prime customers in 2019.
Speaking at the Denver Metro Association of Realtors economic summit a few weeks ago, Danielle Hale, chief economist for Realtor.com, said millennials are expected to make up 45 percent of all people who take out mortgages in the U.S. this year. Hale counts millennials as people between 15 and 35 years old. Gen-Xers will account for 37 percent of new mortgages and baby boomers 17 percent.
Hale’s advice to real estate brokers when it comes to millennials: “You’re going to have to figure out how to talk to them and interact with them and get them over the hurdle of getting into the housing market.”
What are those challenges?
Jasmine Pulce, a 28-year-old doctoral student at the University of Denver who closed on her first home in October, can name a few.
Pulce, who also works at DU in the student affairs department while she pursues her Ph.D. in higher education, embarked on her housing search in September 2017. Over the course of the ensuing 13 months, she experienced the roller coaster that is the Denver housing market for entry-level buyers. She had to adjust her price range down from $180,000 to $165,000, put in offers on two homes only to be outbid for both, and found that she made too much in salary and was carrying too much debt to qualify for a low-income home loan through the Colorado Housing and Finance Authority.
Despite all of that, she was finally able to buy something in her price range less than 20 minutes away from DU by car. On Oct. 26, she officially closed on a one-bedroom, one-bath condo near Cherry Creek Reservoir in Aurora.
“It’s still settling in that I was able to do this,” Pulce said this week, adding that she is still unpacking. “I definitely had doubts and thought about stopping the process several times.”
Two major obstacles for Pulce were a lack of options in her price range and her debt load, issues facing many millennials in Denver and across the county.
During her search Pulce saw modern homes and townhomes going up in many places but all were selling for well beyond what she could afford. The median sale price of a townhome or condo in the greater Denver metro area was $300,000 in 2018, according to Denver Metro Association of Realtors market trends committee. That includes sales in farther out places like Park and Elbert counties. It’s an 11.1-percent increase over 2017.
Local economist Patty Silverstein, meanwhile, told the DMAR economic summit crowd, that although she didn’t yet have final 2018 numbers, she was projecting the metro area wage growth was around 3.5 percent for the year.
The disparity between pay raises and the rising housing prices is especially pronounced for younger workers in lower-paying jobs. The gap couples with rising interest rates, something that Realtor.com’s Hale believes will push the average monthly mortgage payment up 8 percent in 2019.
“Salary is just not what it should be given our cost of living here,” said Pulce, who now makes $50,000 per year after starting out at $42,000 in 2016.
When it came to debt, Pulce can verify graduate degrees don’t come cheap. During her housing search she took out another student loan, bringing her total burden to $80,000. That pushed her debt-to-income ratio, the measurement of monthly debt burden to money made, to 48 percent, a threshold beyond what many lenders are comfortable with.
She’s not alone. As detailed in a story this week from the Wall Street Journal, the Federal Reserve in a recent study linked student loan debt to a 2-percent drop in home ownership rates among people between the ages of 24 and 32 from 2005 to 2014. That equates to 400,000 people who would have bought homes if they could have.
Pulce said she had a great experience with her real estate agent, Rob Childs of HomeSmart Cherry Creek. Her advice to agents looking to get millennials like her into homes is to be cognizant of the gap between income and cost of living. For millennials who want to buy a home she says, “Don’t give up.”
“In the end, it worked out,” she said. She now pays $1,327 a month for her mortgage and homeowners association fees. That’s just $127 more than she was paying a month to rent.
“I’m just hoping to build equity,” she said. “I hope to graduate in 2022, and we’ll see what my home value is.”
Pulce scraped together a combined $7,500 for her down payment and closing costs. Getting together that money is another hurdle that many millennials face in the metro housing market, especially as rents continue to climb. (Average monthly rent in metro Denver hit $1,500 last year, according to Silverstein, up from around $1,000 five years ago.)
“We’re seeing a lot of them get help from family,” Jill Schafer, a Realtor with Kentwood Cherry Creek, said of millennials seeking to raise down payment money. “Some of them are even temporarily borrowing to get into a house and paying it back after.”
Schafer, chair of the Denver Metro Association of Realtors’ market trends committee, has 15 years of experience in Denver and works with many young buyers. She says it helps to communicate with millennials the ways they like to communicate. That means texting them to remind them to check their email for important documents, and advertising listings on Instagram and other social media platforms.
Beyond raising a down payment, a big challenge Schafer has run up against working with millennials is convincing their parents to adjust their expectations. Boomers whose dollars went a lot further when they were buying starter homes, now have to come to grips with the fact their kids aren’t going to get the same deals, she said.
“I have had deals almost go south because the older people start to panic for them,” she said. “I would say bring them along from the get-go so they are being educated at the same time.”
There is good news for the millennials and everyone seeking to buy a home in the Denver area this year, Schafer said. After the number of properties on the market hit a record low 3,854 at the end of 2017, inventory has ticked up. Active listing peaked around 8,800 in the middle of last year, the highest total since 2013, and ended the year at 5,577, according to Schafer’s numbers.
“It’s the best time of year for them to start looking,” she said of millennial homebuyers. “The competition is a little less and there’s a lot more choices.”