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Realtor explains why purchasing a house is more challenging for millennials than it was for boomers

'Many people don't understand the degree at which inflation rose, while salaries did not,' a comment pointed out.

Realtor explains why purchasing a house is more challenging for millennials than it was for boomers
Cover Image Source: TikTok | @fmsmith319

It's strange that some baby boomers still need to be convinced that buying a house today is much more difficult. If it wasn't, more millennials would be buying their dream house and moving in with their dream car and a cute dog.

Nobody wants to flush their paycheck down the toilet into their landlord's money tank every month instead of working toward owning a home and building equity, but we do it because we don't have any other option. In a TikTok video clip, realtor Freddie Smith explained why it's so difficult for millennials to buy homes right now, even though mortgage interest rates are significantly lower than when baby boomers were buying. His video garnered 4.8 million views and his page also explores tips on how millennials could potentially buy a house.

 Image Source: TikTok | @fmsmith319
Image Source: TikTok | @fmsmith319

Smith explained that the combination of skyrocketing house prices and stagnant pay has resulted in accessible mortgage payments for only a small number of people in the younger generations. Those millennials and Generation Z adults who can afford a home are frequently born into wealth. "Any time a millennial is trying to explain this to a boomer, they use the same example," Smith says in a video, responding to a comment. "They go, 'Well, my interest rates were 15 percent, you have six and a half, you're so lucky.' Well, let's look at it this way. 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."

 Image Source: TikTok | @fmsmith319
Image Source: TikTok | @fmsmith319


 

"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 percent 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," he further explains. 

Going into numbers, according to the United States Census Bureau, Smith's yearly earnings estimate for the 1980s ranged from around $21,000 early in the decade to $28,000 by 1989. And, of course, most people had to pay for things other than the mortgage, and interest accrued continuously. So no one could pay off that amount in two years at that salary. However, his overall point does make a lot of sense.



 

Furthermore, Smith points out there is a significant difference between saving $16,000 and saving $80,000, which is true even after accounting for inflation, especially given that pay rates haven't risen significantly while the cost of living has. As a realtor, he sees this firsthand as people struggle to put more than a small percentage down on a home today. In some areas, the average price for a house is double or even more.

"It is incredibly rare that people are putting 20 percent down. People are putting three to five percent down, which with the six percent 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," he says.

Image source: TikTok | @SVZ
Image source: TikTok | @SVZ

As a result, Smith rarely sees people under the age of 50 looking to buy a home. Many millennials agreed with Smith. "My parents built their house in 1990 for $50,000 and can sell it today for $350,000. But 'these kids are just lazy,'" commented @taradavies15. "This has been the most frustrating experience of my adult life as a 33-year-old making 105k annually. Hopefully can get in a home next year," wrote @nurse.roni. "I was told by the banks I don't make enough to afford a thousand dollar a month mortgage, so I continue to pay 2k a month in rent," shared @jessicaclay94.

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