Millennials
An online survey conducted by Harris Poll on behalf of Nerd Wallet recently found that millennial parents (ages 18-34) are “supersavers.” Other interesting findings shared in the report…
• Among employed millennial parents, 38% contribute MORE than 15% of their income to retirement savings.
• Very few are not saving anything; only 7% save nothing (compared to 18% of baby boomer parents).
• If their savings rate continues, millennial parents could be setting themselves up to retire with $1 million more than baby boomer parents and $400,000 more than Generation X parents.
Another statistic I found impressive, was that the median millennial parent saves 10% of their annual income. That is substantial compared to other generations and will result in powerful implications for the economy.
The second part of this report was about additional savings that will impact confidence: “A savings differential as small as 2 or 5 percentage points may not seem like much (compared to baby boomers), but it adds up over time to make a big difference in how much money the parents in these age groups could have available for retirement.”
What Does This All Mean?
Extra savings, greater confidence, and more retirement money means more millennials will begin to purchase homes down the road and will likely pay more with their swiftly built savings. Over the long term, home prices will press higher, especially throughout the South Bay with high-income earning millennial parents and limited land supply.
Much like baby boomers influenced the rise of the mini-van, millennials will influence other products today and into the future…almost certainly that will include residential housing.
My bet is that older millennials (in their 30s today) will benefit the most from increased savings and coming housing demand as they are the front-end of this massive generation’s growing buying power. That is not to say younger millennials (in their 20s and even teens) are at a disadvantage, they just need to hyper-focus on their savings now and get in earlier than age 31 with buying property down the road.
A separate Nerd Wallet analysis examined government surveys and found that many millennials want to become homeowners but believe it is impossible. However, the study found that many of these perceptions were false. As this generation reaches home buying age (31), there may be more options than one thinks.
Let’s take a look at some “millennial specials” or creative examples throughout the South Bay that might work…
1604 Via Garfias, Palos Verdes Estates (Lunda Bay/Margate)
2-bedrooms, 2-bathrooms, 1,536 sq. ft., 6,649 lot
Asking: $1,195,000
Down: $119,500 (10%)
PITI: $6,500/mo
This home is a low price for almost any SFR in Palos Verdes Estates off busy streets. It is an older home but very livable in its current condition. This would allow buyers to grow into the home using it as a 2-bedroom today; and with the 1,536 sq. ft. foot print, this space can easily be redesigned on the interior for a fabulous 3-bed/2.5 bath space in the future. Tough to get in to PVE anywhere lower than this asking price and there are 10% down loan programs to help get you in the door.
1155 11th Street #9, Manhattan Beach (just east of Sepulveda)
3-bedrooms, 2.5-baths, 1,542 sq. ft., townhome
Sold: $880,000
Down: $176,000 (20%)
PITI: $4,600/mo
It is not easy to own housing in Manhattan Beach for under $1 million. But if you are patient, you would be surprised at the condo/townhome sales just east of Sepulveda along Manhattan Beach Blvd. Buy it and rent out the other rooms to roommates for $900/mo each…your payment would drop to $2,800/mo. Not a bad deal when $2,800/mo seems to be standard rent for Manhattan Beach these days.
2004 Grant Avenue, Redondo Beach (Villas South)
Duplex with 1,653 sq. ft. and containing a 3-bed/1-bath unit and 2-bed/1-bath unit
Sold: $1,320,000
Down: $330,000 (25%)
PITI: $3,400/mo (if you live in the 2-bed and rent out the 3-bed unit)
Not interested in having roommates like the townhome example above? Well, purchase a duplex like this where you can rent out the 3-bed for $2,850/mo and significantly bring down your monthly nut. If you need more space down the road, then trade up to the 3-bedroom without having to sell the property. The monthly overhead is less than the two above examples and this could be kept as an investment property in the future since you could hopefully continue to save for another down payment to a single family elsewhere
3601 W. Hidden Lane #205, Rolling Hills Estates
1-bedroom, 1-bath, 659 sq. ft., condo
Asking: $349,999
Down: $34,999 (10%)
PITI: $2,250/mo
Looking for the ultimate penny pincher property? Well, you can find insane savings at The Estates Condos where there are clean 1-bedroom units for the mid-$300k price range all day long – and sometimes bachelor units in the mid-$200s. Too far away from the beach? Then check out Brookside Village in Redondo Beach (like 812 Camino Real #203) or the multitude of condo options in the Hermosa Valley.
Conclusion
The wave of millennial homebuyers is coming, but do not put stress on yourself to go out and buy right now. Take your time, this is going to be a long multi-year “rising tide,” so to speak, that could last a decade or two. The keys to your success in a home purchase are twofold: 1) make sure you are 100% ready and can afford the property through good and bad times, and 2) be prepared to own the property over the long term to enjoy the benefits of the rising tide.
Be patient, start planning, and enjoy the ride!