For years, millennials have lagged behind older generations when it comes to homeownership, but we are making some progress. As of a 2022 study, 51.5% of millennials — that is, ages 27 to 42 — owned their homes, marking the first time homeowners outnumbered renters in our generation.
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He's a Realtor in Orlando whom you might recognize from his time on "Days of Our Lives," and he's gone viral on TikTok for breaking down the financial hurdles facing millennials in a way that even the most stubborn boomer uncle can understand.
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In a video that's been viewed 4.4 million times, Freddie (@fmsmith319) responds to a commenter who wrote, "I can't get a mortgage. But my rent is 3k." Freddie replies, "Any time a millennial is trying to explain this to a boomer, they use the same example. They go, 'Well, my interest rates were 15%, you have 6½, you're so lucky.' Well, let's look at it this way."
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"If you bought a house for $80,000 back in the '80s, a 20% down payment would be $16,000, and the average person was making around $30,000* back then. So your down payment was just half your yearly salary. And then the loan you would have on it would be about $60,000. So in order to pay off the $60,000, if you really wanted to, it's just two years of your salary, and you could have your house paid off."
"Well, let's fast-forward to 2023, and I live in Orlando, so I'll use this as an example. A $400,000 house with 20% down would cost $80,000 just as the down payment. The average person makes $50,000*, so it's almost twice their yearly salary just for the down payment. Then they've got a $320,000 loan left that they have to look at. That's nearly seven times their salary to pay off the loan regardless."
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*The median salary in 2022 was $56,420.
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He goes on to explain that in his experience, there's another factor making things hard on younger homebuyers. "It is incredibly rare that people are putting 20% down. People are putting 3% to 5% down, which, with the 6% interest rate, is still shooting the mortgage through the roof. The payments on these homes are $3,300 to $3,500 a month on an average, simple three-bed, two-bath home. So that's the difference."
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In the comments, people are chiming in to share how the ballooning costs of homeownership are affecting them. One person wrote, "This has been the most frustrating experience of my adult life as a 33yr old making 105k annually. Hopefully can get in a home next year."
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Others pointed out that this calculation doesn't even include inflation and the rising costs of everything that people need in order to live.
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And some Gen X'ers dropped by to share how much the costs of living have changed since the '90s, when they bought homes. One person wrote, "I'm gen X. I bought my first house in 1998 for 70k, 5.5 interest, and payments were $500/month. My income was 21,000/year. Cost of living is wild now."
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And he gave an example to illustrate how quickly the costs have risen just in the past three years. "In 2020, a home would sell for $320,000 at a 2.5% interest rate, which would be about $1,200 per month. The individual would have to earn about $60,000 per year to be considered for that loan."
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"That SAME home in 2023 would sell for $550,000 at a 7% interest rate, and the monthly payment would now be $3,800 per month. That same individual would now have to earn $130,000 per year to be considered for the loan. Even if the buyer can be approved, it is still a huge chunk of their income for housing, which then limits saving and investing for the future."
He also shared some generational trends he's seen in his own clients. "Despite the housing costs, there are many millennials who have been saving and purchasing their first home. Typically, I see them putting down 3% to 5%. I also see, in many cases, the younger generations getting down payment assistance from parents and/or cosigning to get their foot in the door. Most of our clients, at the moment, are older buyers: Gen X and boomers. Typically, a Gen X'er bought their home 10 years ago and now have a ton of equity in their property, so when they sell to upgrade to a new home, they are bringing 30% to 40% as a down payment, which is overall keeping their monthly payment manageable. As far as the boomer generation, these individuals have built wealth and are buying second or third homes in cash."
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Finally, Smith shared what he's taken away from the response to his video. "What I gathered from the 15,000 comments is that most millennials are feeling the pain, not only from housing costs but overall inflation. The older generation, not to pick on them, but reading the comments, some seem to be out of touch. They continue with the typical, 'If you just work harder,' 'cancel Netflix,' 'make coffee at home,' you could afford a house," he said.
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"I think two things need to happen at once: We need to figure out as a people, all ages, how to slow down and decrease inflation and simultaneously keep living our lives, working hard, and surrounding ourselves with people that make us happy. I do think millennials are the generation that will turn this ship around; it's just a matter of time," Smith said.