For millennials in Silicon Valley, buying a home is pretty much a nightmare

How hard is it for millennials to break into the homebuying market?

It’s hard.

Especially in San Jose.

A new report shows that between 2005 and 2015, the rate of home ownership among millennials in the San Jose metro plunged faster than anywhere else in the country — a 34.8 percent decrease “in the heart of Silicon Valley,” as the report puts it.

The report by the Abodo apartment search website shows that when U.S. metros are ranked for having the most millennial homeowners, San Jose ranks 131st on the list. Only 20.2 percent of millennials in San Jose own homes. That’s even worse than in the San Francisco-Oakland metro, where 20.5 percent of millennials are homeowners.

And ponder this: The average millennial in San Jose would have to sock away 15 percent of his or her annual income for 27.9 years in order to afford a 20 percent down payment on a home. The average value of a millennial-owned home in San Jose is $737,077.

Not surprisingly, most millennials rent in the San Jose metro — 79.8 percent of them.

If you are a millennial, you might not want to read this report, which is filled with depressing reminders — for instance, the fact that millennials grapple with earnings 20 percent lower than those of boomers. At the same time, millennials often are burdened with high student loan debt.

By compiling data from the U.S. Census and crunching numbers from the MLS, Abodo is building on a 2017 report by the Joint Center for Housing Studies at Harvard, showing that 1.4 million recent U.S. homebuyers were under age 35 in 2015. That figure, Abodo notes, “is well below pre-boom levels. The number of homeowners over age 55 jumped by 13 percentage points to 54%, between 2001 and 2015, while the share of homeowners under age 35 shrunk by 5 percentage points over the same period, to about 33%.”

The Harvard report is here.

And Abodo’s full report is right here.

This chart puts San Jose’s precipitous decline of millennial home ownership into context:

Top: Illustration courtesy of Abodo

 

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  • Evan Adams

    Prop13 blah blah blah prop13.

    • rick jones

      I’ll bite – are you blaming Prop 13, or criticizing those who blame Prop 13?

      • Evan Adams

        Hmm. Good point. Both. Yea. Both.

      • Anon

        Lack of high rise. Simple

  • tw4613

    Good. Those spoiled brats need a little adversity to toughen them up a little. No participation awards when it comes to buying a home here kids! Mommy and Daddy never told you that there really are winners and losers in life.

    • Eddie Poe

      I wonder how many are going to do just that, without realizing you meant it ironically.

      Social Media makes unsocial people.

  • KimJongicrat

    Remember. The Russians and Trump did this.

    • No_Diggity

      THANKS OBAMA.

  • SouthBayGuy

    I work with a lot of millennials in a pretty good tech industry (not software related). They are a hard working bunch that struggle with the soaring cost of housing over the last few years. It’s hard to save for a down payment when their wages haven’t gone up accordingly, and a larger slice of their income goes to paying rent. I feel for them. I was fortunate to buy my house after the 2008 crash. It seems they will have to wait for the next housing crash to get into the market.

    • Jason

      Which might be coming soon.

  • Left Unsaid

    Since the whole planet is invited to speculate on our real estate market, its not surprising. How can a person just starting out compete with a chinese industrialist looking to stash dirty cash in a safer place, and establish a beach head for his family?

    End foreign ownership of CA properties.

    • SouthBayGuy

      Do you have stats on how many bay area home sales went to foreign owners? I’m curious if it’s as much of a problem as you think it is.

      • Left Unsaid

        http://www.sfchronicle.com/business/networth/article/More-U-S-homes-bought-by-foreign-residents-8344394.php

        Buyers aren’t required to disclose their addresses, many are LLCs, strictly for investment/speculation purposes.

        • SouthBayGuy

          According to that article, 15% of purchases by foreigners were in California, for a total of about 32,000 transactions ion 2016. Compare that to about 460,000 total home sales in CA, or ~ 7% http://journal.firsttuesday.us/home-sales-volume-and-price-peaks/692/. I didn’t break it down by region, but it doesn’t look like it’s as big a problem as some people think. I guess it depends on your perspective. If you’re selling, you like the higher prices. If you’re buying, not so much.

      • Eddie Poe

        I’ve been wondering that myself, with all the news of “Chinese buyers with all cash.” Last several homes I’ve seen selling, none of the buyers were even Asian, and I know there was a bungload of financing involved.

  • Reed More

    Sorry, but this is nothing new. Worked full-time going to university and still had $40k in debt. Saved for 20 years to get my house in San Jose.

    If you want a house in your 20’s, you aren’t going to get one in a major metropolitan such as the bay area, greater NYC or even Chicago. Spent years commuting on public transportation to get to work. It isn’t something new.

  • omegatalon

    These Silicon Valley millennials are demonstrating that they’re not as bright as they claim or they would think outside the box by buying up entire blocks of East Palo Alto in neighborhoods that are currently not as nice; this is what the millennials in San Francisco did by buying up property in the Tenderloin and Mission as they bought homes one block at a time until they owned the neighborhood.

    • Mark D

      Houses in EPA start around $800k, and are averaging around $1.4 Million. Kind of hard to do that today, was much easier in 2009 when we bought. The house we paid $450k for is now well over a million. Houses that were $200k in 2009 are now $800k.

    • Mark D

      East Palo Alto is rapidly turning into “Palo Alto East.” It has a prime location, a short bike ride from Google, Facebook, and Stanford. Apple is about a 25 minute drive. Violent crime is dramatically down, and EPA is now twice as safe as San Francisco and Santa Cruz. I don’t think there has been a murder in EPA so far this year. Lots of new construction is on tap, and Amazon is moving 1300 engineers into an office building here. Laurene Powell Jobs (Steve Jobs widow) owns something like 7 acres of land that is currently under development. Not a cheap location anymore, even if it is still a big (50%) discount from Palo Alto and Menlo Park.

      • tw4613

        EPA is a gold mine for those who got in early. I wish I had the capital to purchase entire blocks.

      • Barry Badrinath

        “Apple is about a 25 minute drive.”

        This one statement is how I know you’re lying.

        • tw4613

          In a perfect world with no traffic……it would be about 25 mins from EPA.

        • Mark D

          It is 14 miles from my house to Apple, approximately 30 minutes if you leave at 9:45.

    • tw4613

      Hard to tell if you are serious but that ship has sailed. The gentrification of EPA and the Tenderloin is already well under way. You needed to gobble up that property a decade ago. Do you believe that there is affordable property available in Bayview/Hunter’s Point?

      • No_Diggity

        The affordable property in Bayview/HP is radioactive property.

        • tw4613

          lol! good point.

  • Captain America

    If you own a home in Silicon Valley, you’re either wealthy, old, living with extended family, or in a bad neighborhood.

    • HolyHell

      Took 8 years of living in a small 2 bedroom apt, saving. Bought a brand new home in Campbell 2 years no problem. It’s al about priorities.

      • Guy LeDouche

        Exactly the same thing I did. Bought in 2008 when the market crashed for half what it is priced at now. Its not how much you make, its how much you spend.

        • HolyHell

          I bet if you open some of their refrigerators and pantries everything will be name brand. Not so long ago I got giddy when I could afford MinuteMaid OJ:)

          • Guy LeDouche

            Exactly. 90% of these gerbils shop at Whole Foods …something I STILL consider a luxury.

      • Captain America

        That means you’re old.

        • HolyHell

          If you think 35 is old

    • SouthBayGuy

      This is actually not far off the mark!

    • tw4613

      Then I guess I am old at an ancient 42 because none of the others apply to me.

      • Captain America

        You’re no millennial, bud.

        • tw4613

          Uh yeah…..no kidding. Thanks for the info. I was totally unaware Thunderbird.

    • Evelyn Bissquette

      I inherited my parents’ house in Sunnyvale. I could sell it for $1.5 million today. No way am I ever selling this house. I still see tons of people I graduated high school with around, also living in inherited houses. Often, when people say they “bought a home” here in Sunnyvale, it’s a townhome or condo, not an actual free-standing home with a big front and back yard plus 2-car garage.

  • Guy LeDouche

    Millennial: BUT I’M SUPPOSED TO GET A TROPHY!!!

  • No_Diggity

    They are also more interested in spending their money on mustachio wax, $14 avocado toast and bubble tea.

    • SouthBayGuy

      Not sure why people keep parroting this cliche. Saving a down payment for even a starter home/condo in this area requires saving tens of thousands of dollars a year for many years. Saving a couple hundred bucks a year on tea or toast isn’t going to get them there. The problem is stagnating wages, tight housing supply, soaring prices.

      • tw4613

        Do you really not know why people love ripping on the millennials?

        • SouthBayGuy

          I think they get a bad rap. People seem to dump on them a lot as if they are the cause of all their own problems, but I don’t really think that’s fair to them.

          • tw4613

            Of course it’s unfair to paint all of them with the same brush but they are the generation of entitlement and it rubs people the wrong way. It is also hard to deny that their d-bag count is VERY high.

          • SouthBayGuy

            I can agree with that. They will grow up though, eventually. I hope.

      • No_Diggity

        Because it isn’t a cliche. If you had a clue as to what you are talking about you would know that it isn’t a couple hundred bucks a year. The minimum spend for a douche-llenial is over $100 per day on fringe items such as bottomless mimosas, pot brownies, artisanal pizza in Dolores Park, beers, etc. We are talking EASILY $12K and that is just adding up the weekends.

    • Left Unsaid

      Avo toast is 14 now? Ess just got real. I’m taking out a second to buy my slices.

  • Mark D

    Lack of IPOs by Unicorns also contributes – hard to get a $400k down payment together if your stock is not liquid.

    • Guy LeDouche

      50% down payments are required now?

    • tw4613

      Maybe set your sights a little lower and don’t start off with a 2 million dollar home.

    • Moon Ahmed

      I think he was being sarcastic…realistically you ned $80-$100k to buy anywhere in the bay right now as a down 5% aint gonna cut it your mortgage and those ridiculous taxes out there are going to decimate your paycheck

  • Adam Lucier

    I’m waiting for user name Resident’s response to this one… His claim is always that we don’t have it any harder than any other generation. Except he’s raked it in during the stock market bull run, cheap west coast housing, higher salaries, and no student loan debt. Ok, nevermind, we just need to stop drinking so many lattes and iphones, that’s the real problem.

    • cv

      Don’t forget the avocado toasts and those crazy Bali destination weddings. They contribute as well.

  • Pierre

    Simple solution. Allow these “millenials” to buy a portion of a home, with the remainder owned by an investor of some kind. The millenial would be allowed to live there and realize the tax breaks while developing equity on his share of ownership. The investor would also benefit due to the home appreciating in value.

    • Moon Ahmed

      interesting model..rent to own model practically…

  • fear_and_loathing _in_CA

    “Millennials in Silicon Valley are making buying a home a nightmare for everyone else.”

    Headline fixed.

  • Hobart Smedley

    Is there a reason why anyone should care about this?

  • John Kelly

    You have to start at the bottom!
    When I move to the bay area 40 years ago I couldn’t afford much of a house so I bought one in a bad neighborhood, East Palo Alto, and hunker down.
    Now I’ve got almost 2,000,000 in equity in my third house which has a stunning view of the Santa Clara Valley.
    It takes a while route

 
 
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