Millennial homebuyers losing out on Hudson Valley real estate market

The process of buying a home is daunting enough when you are doing it for the first time, awkwardly navigating mortgage qualifications and showings while working to secure a down payment and the costs associated with closing. But for millennials especially, who are both the largest generation and the largest percentage of first-time homebuyers right now, the path to homeownership can feel maddeningly out of reach, particularly in the Hudson Valley.

Nationally and locally, the pandemic has only made an already-competitive housing market worse. Historically low mortgage rates dropped even lower after the arrival of the virus, and with remote work-from-home options becoming more common, homes in the Hudson Valley are more attractive than ever for New York City buyers. Last year, Hudson and Kingston emerged as the metro locations experiencing the biggest influx of relocations in the country.

According to the New York State Association of Realtors’ May 2021 report, New York state’s average home sales prices have increased from $384,259 to $481,456 since May of 2020, a 25.3 percent jump due in part to the housing shortage that began before the pandemic.

Hudson Valley millennials are not just struggling through a hot seller’s market, though. The generation entering this inventory-pinched housing landscape is encountering financial challenges of historic proportions.

The investigative Bloomberg feature “Millennials Are Running Out of Time to Build Wealth,” which draws upon data from the Federal Reserve and economists, points out that national homeownership rates for millennials are lower than their predecessors were at the same point in their lives. Despite having a market stronghold, the 25- to 40-year-old millennial cohort — those born between 1981 and 1996 — are 7 percent less likely to own a home than Generation X, who in 2021 are between 41 and 56 years old. Arguably most jarring, it also found that “In almost every way measurable, millennials in the U.S. at 40 are doing worse financially than the generations that came before them.”

Common wisdom for all generations holds that building home equity is the key to building wealth, but the national median first-time buyer age keeps increasing, going from 29 in 1981 to 31 in 2013, to 33 today, according to the National Association of Realtors. Hyper-competitive bidding wars like we’re seeing locally only add additional delays to millennials’ path to homeownership.

Largest group of first-time homebuyers in a tight market

After navigating not one, but two housing crises in the last 12 years, millennials are in an especially burdensome economic position — the severity and reverberation of which may not be fully realized for another two decades.

“Millennial homeownership has been a topic of discussion for many years at our agency,” says Sandra Altomare, the Director of Homeownership at RUPCO, an Ulster County community organization that aims to make affordable housing accessible and home ownership attainable for first-time, low- to median-income homebuyers. “How to reach and market to the younger buyer and how to gain a better understanding of their unique hurdles,” she said, is something her team routinely considers.

Its First Time Homebuyer program provides counseling for mortgage readiness and grants for eligible homebuyers when available to help support transactions. But Altomare says that the housing market directly impacts their success. The average age of first-time homebuyers that have purchased through RUPCO’s program over the last year is 38, five years older than the national average.

“Competition is tough as buyers from urban centers are flooding the market,” Altomare admits, adding that “cash buyers put local homebuyers in Ulster County, especially low-income buyers, at a great disadvantage.” Kingston itself saw the second highest increase in sales nationally, the Washington Post reported, using data from Zillow.

“Oh boy, it’s tough out there right now,” agrees Laurel Sweeney, an associate real estate broker with Berkshire Hathaway HomeServices Nutshell Realty who typically represents sellers in Ulster County and works with buyers in the mid-Hudson Valley and Catskills. “Inventory is at historical lows — something I have not seen in 20 years.”

Average sales prices for homes in New York state, from the New York State Association of Realtors May 2021 report. 

NYSAR and Showing Time

She says that millennials are the largest group in her buyer pool. “I call them all my ‘kids’ and love educating them and helping them through the maze of buying.

Sweeney’s intentions are thoughtful, but let’s all say it together: millennials are pushing 40 now. If you’ve mistaken them for the youngest and most digitally literate generation that grew up watching YouTube instead of television, you’re looking for Gen Z down the hall, ages 9 through 24. They’re the kids now.

One of Sweeney’s millennial clients, 32-year-old Jessica Mann, works for a large media company and has been looking to buy in Ulster since May of this year but has been outbid by cash buyers twice so far. Mann and her partner Rick, also 32, left New York City in March 2020 when COVID hit, “mostly for safety and to have some extra space,” she explained.

Her parents, who’ve had a weekend home in the Hudson Valley for the past 25 years, knew of an available house in Stone Ridge for the couple to rent with their two dogs.

“I thought I would never leave the city, so it’s been a real shift in my mindset to have the desire to move upstate,” Mann wrote over email. “I’m not sure if this is a millennial thing or because I’ve lived in the city for so long (or both), but I’ve never been focused or interested in buying a home. So when COVID hit, and I’ve had the experience of living upstate and the flexibility to work remotely, I’ve now had a total shift in priorities, which includes where I put my money … I worry how inflated the market is, and how that could impact me and my investment in the long run.”

Given the low inventory and downstate cash offers, Sweeney said, “I definitely see frustrated [millennial] buyers — losing out on multiple offers, [and having a] very short window of time to actually look at the home.” These days, she often gets only 15 minutes for client showings.

Her advice in this highly competitive local market “is to be patient but diligent. If something checks eight out of 10 of your boxes, go see the house immediately and be prepared to make an aggressive offer.” Barring that, she recommended putting the home search on pause. “Taking the time to save additional cash and be able to be more aggressive with offers may be a good solution for some,” she said.

RUPCO also encourages clients to continue pursuing homeownership if that’s their goal regardless of market, but Altomare underscores that, for those in challenging living conditions or in the midst of job relocation, waiting may not be a viable option. She suggests buyers manage their expectations “regarding style, condition, type, and location of the home” if they’re managing those kinds of housing transitions.

Making the transition from renting to owning in Kingston

Jessica Mann, 32, has been renting in Stone Ridge with her partner as they look for a home to buy in Ulster County. She has been outbid twice by cash buyers so far.

Jessica Mann, 32, has been renting in Stone Ridge with her partner as they look for a home to buy in Ulster County. She has been outbid twice by cash buyers so far.

Courtesy Jessica Mann

In May of 2020, owning a home in Kingston was within reach for a millennial couple like the Careys. Zac works in manufacturing at a local design and fabrication business, and Elizabeth was a direct support professional working with adults with intellectual disabilities for $13 per hour.

Fast forward a year, she’s now a certified peer recovery advocate. The Hudson Valley Catskill Region’s Multiple Listing Service (MLS) database shows that the average sale price for a home in Kingston was $207,718 from January 1 through May 31, 2020. It’s now $292,773 — an increase of 41 percent — and out of reach for the parameters of their roughly $200,000 budget.

For the aspiring homeowners, waiting for the Kingston market to die down felt unrealistic. “Kingston isn’t going to be Kingston anymore,” said Elizabeth, who is 32. “The music and the murals and the little shops aren’t going to be there if the people who’ve created it can’t afford to live here anymore.”

Elizabeth has lived in the mid-Hudson Valley for 12 years, the last four of which she resided in a three-bedroom Rosendale apartment with her husband, brother-in-law, and their pets. When her landlord raised their rent for the second time during the pandemic, the couple decided it was time to move on and start looking for a house.

“I don’t know the number anymore,” said Elizabeth of the amount of times she and Zac, 33, put in offers over asking price for homes in the $175,000 to $200,000 range but were nowhere near being competitive. “It must have been eight or nine offers and each was turned down. If you want to use seller’s credits, don’t even bother because there’s too many competitive offers around here,” she warned.

Student loan debt, lack of generational wealth lowers options

With a loan officer in the family helping guide her, Carey started navigating the mortgage process almost nine months ago, but there were additional hiccups along the way aside from being outbid by downstate cash buyers.

The financial load and limitations that come with student loan debt also proved challenging. According to the 2021 National Association of Realtors Buyers and Sellers Generational Trends Report, the debt to income ratio was one of the biggest reasons that millennial buyers were denied loans, and student loans made up the biggest source of millennials’ debt.

“Three to four years we’ve been saving, and we had enough to put a decent down payment on a house. But because [Zac] had student loans, for us to get a good enough rate, we’d have to pay those off completely because he’s not in school anymore,” she explained, adding that they didn’t initially realize how much his debt would hamper the mortgage application process. Paying off his $10,000 loan burden meant sacrificing their down payment.

“On the younger end of the 25 to 40 age range, we see student loan debt as a considerable factor,” said Altomare. “Many are surprised that they have very good credit scores but the inability to buy a home due to high debt ratios.” 

When homeownership is all in the family

After a long, unsuccessful home search in Kingston, in part because of student debt that made the mortgage application process difficult, Elizabeth and Zac Carey began house hunting in the Capital region, where the millennial couple closed on a house in late June.

After a long, unsuccessful home search in Kingston, in part because of student debt that made the mortgage application process difficult, Elizabeth and Zac Carey began house hunting in the Capital region, where the millennial couple closed on a house in late June.

Courtesy Elizabeth Carey

Besides being the most educated and in-debt generation to date, studies also show that millennials are more likely to live at home, delay marriage and childbearing, and receive later-in-life family inheritances — if they’re available to them at all. Millennials are also the most racially and ethnically diverse, and therefore potentially subject to lender and wage discrimination, which further complicates the generation’s general fondness for living in high-cost cities.

As more millennial people of color enter the marketplace during their peak buying years, vying for a seat at the homebuyer table with significant historical wealth disparities puts them at yet another disadvantage: a lack of generational wealth.

The Federal Reserve Board’s 2019 Survey of Consumer Finances concluded that Black families’ have less than 15 percent of the wealth that white families do, with Hispanic families’ median and mean wealth landing slightly higher, just under 17 percent than that of whites. Now consider the pandemic and 2020’s 3.5 percent economic contraction, and these strained circumstances are being exacerbated, pushing more under-40 adults to live at home with their families than any other generation in recent history.

Fifteen percent of millennials were living in their parents’ home in 2018, a percentage nearly double that of early baby boomers (ages 57-75) and the silent generation (now ages 76 to 93), and 6 percentage points higher than gen Xers who did so when they were the same age.

According to the National Association of Realtors’ 2021 generational trends report, 18 percent of homebuyers between the ages of 41 and 65 purchased a multigenerational home last year — one that might house one’s elder parents or grandparents, adult siblings or adult children, and yes: younger generations, too.

“There are a variety of reasons why large families and extended families are opting to live together, one of which is that it’s a great way to save money,” said Jessica Lautz, Vice President of Demographics and Behavioral Insights for the National Association of Realtors. Millennials who can’t afford a home of their own and fear that their retirement is in jeopardy would certainly benefit from bunking up and stacking their coins, especially since houses cost more than they used to. A lot more.

Home prices have risen, wages have not

The national median home price for millennials today is $328,000, which is $112,000 higher than the median home price paid by baby boomers in 1989, when adjusting for inflation, according to Bloomberg’s report on millennial homebuying. Wages, however, have only risen 20 percent.

If they had goals to further their education or climb the corporate ladder, millennials in their 20s during 2008’s Great Recession undoubtedly felt ripple effects from the financial crisis. Whether it was through witnessing or experiencing mass layoffs — and subsequent mentorship and advancement setbacks that followed — millennials have met unique economic challenges in the early stages of their careers where professional development is critical.

And for a rent-burdened generation who are somewhere between the age range of 25 and 40 years old, the national minimum wage stalling at $7.25 per hour has certainly made it difficult for them to get ahead. (Minimum wage in New York State is $12.50 per hour.)

Family loans key to closing

After multiple disappointments and exhausting their options house hunting in Kingston and Kerhonkson — “They’re calling it Kerhampton, apparently, because everyone from the Hamptons is coming up and buying [another] home!” — the Careys gave up trying to buy a mid-Hudson house and shifted their search higher north, to the Capital District.

“Take the offer,” Carey tells local home sellers who need the money in the aftermath of the pandemic — but also be aware of the local impact. “Sell it to the idiot in the city and let Kingston eat itself because there are no jobs to support the rents that they’re trying to charge people. Yeah, go for it, make that money and get the heck out of here!”

She and Zac certainly are.

In Albany and Troy, though still within the relocation crosshairs of New York City, the Careys had better luck; they found that they were able to take more time at house showings and weren’t outbid with a flurry of downstate cash offers.

After receiving an accepted offer at an asking price of $175,000 on a home in downtown Albany’s Ten Broeck Triangle neighborhood, they closed in late June. Zac will keep his current job, commuting on a hybrid-remote basis, and Liz found a new position that centers her in Albany and Troy.

Coming in at the eleventh hour to help subsidize their down payment was Carey’s father, who recently sold her childhood home in Washington, D.C. at a tremendous profit. Had it not been for his help and generational wealth, she acknowledges that they would have had to back-burner their house purchase at least another year.

“Anyone with more resources from any source is going to have more success in the home buying process than those that don’t,” said Altomare.

Altomare said “most of our clients usually come to us because they don’t have enough resources.” Within RUPCO’s programs, she notes, “We rarely see anyone that has generational wealth in the means of gifts or inheritances.”

When it comes to family wealth, Berkshire Hathaway’s Laurel Sweeney is seeing some amongst her clients, but not an overwhelming amount. “Most of my millennial buyers have saved enough for their down payment and buying here is much more affordable than downstate. They get so much more for their money!” she said.

Carey is fortunate to have generational wealth to help her, but it’s telling that even with an injection of capital, she’s forced to relocate an hour north of her community. The barrier to entry is even higher for aspiring Hudson Valley millennial homeowners in less privileged financial circumstances, especially with so much competition.

Some millennials shun buying, find it tough to find affordable rent

This 3-bedroom Kingston home that a millennial client of Laurel Sweeney's recently bought in Ulster County sold for $610,000, nearly $60,000 over ask, with a traditional mortgage from a local lender.

This 3-bedroom Kingston home that a millennial client of Laurel Sweeney’s recently bought in Ulster County sold for $610,000, nearly $60,000 over ask, with a traditional mortgage from a local lender. “Most of my millennial buyers have saved enough for their down payment,” she said, “and buying here is much more affordable than downstate. They get so much more for their money.” 

Berkshire Hathaway HomeServices Nutshell Realty

During her 18 years at RUPCO, Sandra Altomare has seen plenty of potential buyers realize that purchasing is not right for them during the time that elapses while they wait out tough bidding wars, and she has her own suspicions about why millennials might not be becoming homeowners like previous generations have.

“Some do not want the responsibility of maintaining the home and would rather use their time, energy, and money to pursue life experiences that enhance overall well-being and socially responsible activities. Many see how their parents struggled with homeownership and don’t want that experience,” she says.

The grass isn’t always greener, however, especially as the rental market, too, has become more challenging and expensive.

For several years prior to the COVID-19 pandemic, the Hudson Valley was experiencing a rental desert of too few available units. Much like the housing market, it’s now become more difficult to rent — even for working millennials and mixed households.

When they were still searching in Ulster County, the Careys made a request of their realtor to not be shown houses currently being rented by residents so as to not displace them, something that made the search process in the city of Kingston “nearly impossible.” As renters themselves who’ve had to move apartments when building ownership changed hands, uprooting community members and contributing to the region’s cycle of displacement was not something they wanted to participate in.

“The most frustrating thing was going into homes knowing that it was a renter that was being kicked out,” or that different buyers, even if they kept the tenants, would turn around and raise the rent, Carey says.

“Young buyers with children trend toward homeownership as opposed to renting as it is increasingly harder to find rentals that have three or more bedrooms, and rental amounts are comparable if not more than a mortgage of the same type of property,” said RUPCO’s Altomare.

For a long-term resident of Ulster County who cares about the community as Elizabeth Carey does, does she also resent the locals who are selling their homes to out-of-towners, or the influx of New York City residents who are buying those homes?

“I want [local] people to make money,” she said firmly. “If there was someone who had a home and they got it from their parents — it was $42,000 [years ago] and now someone is willing to pay $400,000 for it — take it and go live somewhere wonderful, but it won’t be in your home town.”

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