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Are California's Millennials Finally Becoming Homeowners?
Real Estate

Are California's Millennials Finally Becoming Homeowners?

Millennials are coming around to the idea of buying beginner homes rather than leaping into their dream home – but renting is often cheaper.

California.com

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4 min read

October 15, 2022

The largest generation since the baby boomers, millennials have been highly scrutinized over trends mostly out of their control. One of the many points of contention has revolved around millennial homeownership, which has become particularly out of reach for those living in California. While those born between 1981 and 1996 are within traditional home-buying ages, factors such as higher education levels, increased rent prices, and more densely packed cities have all contributed to the slower rate of home purchases for this generation.

With soaring rent prices and the increased risk of diving into debt, California millennials are questioning their choices. Is it more favorable to have an established career and delay jumping into taking out a mortgage, or to surrender to peer pressure and take the plunge anyway all in the name of owning a home?

Birds of a Feather

Birds of a feather flock together, and millennials are nothing less than a synchronized harmonious bunch.

California alone is home to nearly 10 million millennials, making up 13 percent of the population—double that of any other state, aside from Texas. Additionally, Los Angeles has the second-largest millennial population in the country, preceded only by New York. If you’re thinking to yourself, “why are a large flock of millennials moving to California?” – the reasons lie somewhere along the coastal shores. Nothing makes more sense than wanting to relish the perks of nearshore regions like San Luis Obispo.

Yes, factors such as a growing preference to live in areas such as Santa Barbara or Cupertino leave the state in high demand, but the rise is making it less feasible to buy a home in these booming metropolises. While attractive jobs such as those in Silicon Valley and San Francisco often come with higher salaries, California wages are being entirely outpaced by rent prices. Moreover, rising home prices are making it difficult for millennials to even save for a down-the-road down payment.

According to Business Insider, in five of California’s metropolitan areas—including coveted cities like San Francisco, San Diego, and Los Angeles—the salary needed to qualify for a mortgage on a median-priced house is upwards of $100,000 per year. However, the National Association of Realtors reports that median incomes in those areas hover around $88,000. When coupled with the fact that millennials living in California are getting married and having children later than previous generations did, it is no wonder millennials are not purchasing homes. Property is simply not affordable in the regions where most of the jobs in California are available – and where millennials are most keen on building careers.

In addition to coming of age during the housing bubble burst of 2008—which instilled a sense of fear and raised interest rates—millennials have been affected by ballooning student loan debt, which did not touch previous generations to the same extent. This only begs the question: will gen Z be able to afford houses? Attaining a higher education and advanced degrees has led many young adults to not only accrue a larger amount of debt before reaching the traditional home-buying age but also delays the age at which they begin working steady jobs, therefore slowing the process even further and encouraging them to rent rather than buy. But with millennials putting things into perspective, gen Z will presumably have the smoothest maneuver over the scheme of hyperinflation. 

Baby Boomers vs Millennials

A few small details created a wide gap between generations.

Various financial struggles and increasing expenses are becoming one of the many common millennial characteristics. While wages have gone up since the 1970s, the inflation rate, through increased living costs, has eclipsed the normalcy of a pertinent social lifestyle. A fast-paced world has welcomed the fast increase in college tuition, rent, and housing – keeping millennials on their toes. Nevertheless, these real estate laws and rebellious circumstances have granted millennials the opportunity to opt for financial literacy.

Though it could be speculated that millennials are more self-aware when it comes to their status - economically or otherwise - the social benchmarks have slowly started shifting. Most are not necessarily tempted to bite off more than they can chew, in other words, abide by social standards. In fact, leaning towards more creative ways to make money has been the invariant outcome of the confusion. Side hustles, moreover, have made room for millennials to practice unprecedented skills and gain extra experience all while saving up for a downpayment.

Redefining life skills has been a pursuit of the millennials who were born in the most transitional periods of the planet. The introduction of intense technology, smartphones, and social media prototypes has created downright new and global values. Although encouraged to splurge on entertainment, millennials have actually figured out ways to unite business with pleasure – successfully. Using technology to their advantage, from play-to-earn to cryptocurrency, millennials are prone to having innovative and entrepreneurial mindsets, now more than ever. With an entire generation raising the bar, millennials have practically managed to make the shift easier and smoother, setting everything into perspective.

Are Millennials Buying Homes in California?

Most millennials are considering the idea of beginner homes while establishing careers in large cities.

Despite the hardships, the rate of homeownership among millennials is finally on the rise. Thanks to generous parents who allowed their boomerang children to live at home for free, real estate developers have clasped this gap as an opportunity to sell lower-priced homes. So, if you’re wondering how to buy a house as a millennial in California? New constructions like the New Haven development in Ontario, offer much more affordable options compared to the million-dollar houses in San Francisco or Sacramento.

Millennials are also coming around to the idea of purchasing beginner homes rather than leaping into their dream home. As a whole, however, with pricier health insurance and childcare, renting is still a more attractive option – especially for those still recovering from student debt and establishing careers in large cities.

Ultimately, millennials are in fact heading toward the direction of becoming homeowners, only at a later age in life when they are more settled and secure. And who can blame them? With real estate being such a serious investment, it’s applaudable of them to wait until they are completely prepared for that next big step as opposed to making irresponsible decisions.

Most millennials are considering the idea of beginner homes while establishing careers in large cities.

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