You are currently viewing Locked out – richmondmagazine.com

Locked out – richmondmagazine.com

After more than two years of saving and saving, Sheron Johnson is ready to buy her first home.

A 29-year-old talent scout who lives with his mother in Manakin-Sabot, Johnson is working remotely to save on gas and car insurance, has found a way to cut his phone bill to $25 a month, and is religiously cutting coupons. Since the start of the pandemic, she has accumulated savings and is now eligible for a mortgage of up to $300,000.

She has been looking for a house since January 2020 – to no avail.

“I’m determined to make a sensible decision,” says Johnson, who is postponing marriage and a family until she has built some equity. “I want these 30 years to be about building wealth. Right now I’m just focusing on building the foundation so I can be a good parent.

The housing market, however, is not cooperating. Inflation, the rising cost of building materials and dwindling home inventories are pushing up home prices and forcing first-time home buyers like Johnson to sit on the sidelines.

Johnson’s realtor, Jenn Cox, says the market is so competitive that nearly every available home attracts 10 to 13 interested buyers. Often those other buyers are baby boomers with bigger savings and real estate equity looking to downsize, or people moving to the Richmond market from somewhere else, like California or New York, with more financial resources. They forgo inspections and appraisals, sometimes offering 20% ​​or more off the list price. They bring more money to closings.

“There just aren’t enough homes to go around,” says Cox, who has more than 20 customers waiting to make their first purchase. “I have a database of first-time home buyers for homes between $150,000 and $250,000, but of course I can’t find anything. I have people who are approved for $360,000 and up, and they are still waiting.

Most of her clients are millennials like Johnson, in their late 20s and 30s. Born between 1981 and 1996, millennials overtook baby boomers as the largest adult population in the United States in 2019 at 72 million. They are better educated (39% of millennials have a college education, compared to 29% of Gen Xers, according to the Pew Research Center), with the lowest marriage rate of any previous generation. According to a 2020 study by Pew, 44% of millennials are married, compared to 53% of Gen Xers and 61% of baby boomers at a comparable age. Collectively, millennials have postponed major life decisions, including having children and buying a home.

For years, demographers have often referred to Millennials as the “renter generation.” After the housing slump that began in late 2007 and the ensuing recession, the idea of ​​creating wealth through the purchase of real estate lost its luster.

“What’s unique about the millennial population is that they’ve been hit by the recession at some pretty key times,” says Ryan Price, chief economist for the Virginia Association of Realtors. During the 2007-2009 recession, “a lot of millennials were fresh out of college, high school. They had difficulty finding jobs. They couldn’t save,” Price said. Then the pandemic hit, forcing many to dip into their savings just to stay afloat. Worse still, demand for new homes has skyrocketed in 2020, reducing available inventory and driving up rents. Just as young renters warmed to the idea of ​​buying a home, they found themselves off the market.

The pandemic has also increased the appeal of traditional single-family homes. With restrictions on public gatherings and the rise of remote working, some have moved from condos and apartments in urban markets to more suburban areas. The most recent census figures confirm this trend, Price says. (Chesterfield and Hanover counties were among the top 10 jurisdictions in the state by population growth in 2021.)

While millennials have lagged previous generations in homeownership (38% of millennials aged 25-34 owned a home in 2020, according to census data, more than 7 percentage points less than Gen Xers and baby boomers at a similar age), they’re now flooding the homebuying market, says Laura Lafayette, chief executive of the Richmond Association of Realtors. “Where the demand is highest and most intense is our first-time buyer market — anything under $300,000,” she says. It’s a trend that is unlikely to change: “The market we have today,” says Lafayette, “is the market we will have for the foreseeable future.”

Forcing millennials out of the home buying market could impact the economy for years to come. As baby boomers and Gen Xers retire on fixed incomes, they lose disposable income. Working-middle-class families typically have more to spend on goods and services, which fuels the local economic ecosystem.

Key to creating wealth, home ownership also strengthens neighborhoods and the broader social fabric.

“You want people to invest in the community,” says John W. Martin, president and CEO of the Richmond-based Southern Institute of Research. “It’s harder, I think, for people to do that when they’re not locking themselves into a place, a neighborhood that they can invest in and build a support network.”

Residential developers, however, are finding workarounds. The dwindling stock of new homes has spurred an increase in condo and townhouse development, especially in suburban communities. Young professionals and married millennials, Martin says, are predisposed to more urban developments.

“Higher density is a good thing. Maybe it’s just out of necessity [the lack of housing inventory] puts more positive pressure on some of those alternatives,” Martin says, “and that’s good for suburban redevelopment.

Johnson, the talent scout, shifted his home-hunting focus to condominiums. She is looking around the Midlothian area and likes the idea of ​​not having a garden and the responsibility of looking after a bigger house. Moving into a condo now, she says, would allow her to build some capital, even if it’s only for a few years.

“I would look at houses first, and I think it’s a lot of work,” she says, adding that condos don’t require roof repairs, gutters and all the maintenance. “And if I’m fed up and want to move, I’ll definitely make some money out of it.”

Leave a Reply