So my D graduated 2020, was fortunate to work from home the 1st year, and completing her 2nd year of work next month. She and her roommate had a one month lease at midtown Manhattan for 5k ( yes, that’s $2,500 each !!!). She is now moving to her own apartment in mid June for close to $3k/month ( the rent increase was gonna be $5,800/month so she figures she is better off living on her own with same price. ) just unbelievable the rents in NYC !!!
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D2 (Class of 2012) and her BF are looking at buying a house since they will be living in Utah for another 3 years at a minimum while BF attends PT school. The median house price in Salt Lake City is $568,000. If you want to live on the east side of the city close enough to have a reasonable commute to the University, the median price is closer to $800K. Most of the housing stock is old in SLC, much of it built prior to 1970. They hoped to buy a house for around $400-500K, but in the 4 months they were actively looking, only a small handful of house were listed under $500K. Houses were selling for 10-25% above asking within 4 days of listing. D even sent me Zillow listing of one house listed for $500K. It was a 1960s era house ( 3 bedroom, 2 bath, not updated) that had been meth lab. It sold in 3 days for over the asking price.
SLC is listed as being in the top 10 for most over-valued houses in the US, but that hasn’t stopped people from buying. She was talking with a rental agent about renting a house he had listed for rent. The agent called her back 3 hours to later to tell he wasn’t renting the house because he had gotten several dozen offers to buy the house and was selling it sight unseen with no contingencies to a man who lived in Rome.
D is kicking herself. I had suggest she consider buying a house 4 years ago when she first moved to SLC. If she had, her house would have appreciated by almost 40-45% by now.
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Dh lived in this house in San Diego/Pacific Beach 30 years ago. He had the opportunity to buy it and wanted to, but he was in the Navy at the time. His father advised against it since Dh was being stationed elsewhere a year later and it would be a pain to manage a rental from afar.
Who knew 30 yrs later our D would end up moving across the country to go to college in San Diego and stay there after graduating? She could have been living in the house and we could be renting out the other unit. The property is now worth nearly $3M. We try not to think about it!
https://www.zillow.com/homedetails/1411-1413-Oliver-Ave-San-Diego-CA-92109/295349327_zpid/?
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Buying a house is out of the question and the bank of Mom (in this case) is not enough for Mom to buy a house either. We are all renting and the rents in the Northeast are out of control. Rent control needs to make a come back. (One kid has been in San Diego in a studio for $1500 which is very affordable compared to Boston.)
Every apartment I have recently looked at has at least 50 people interested. If the rent is under $1800, I have seen 243 contacts in 8 hours after posting. Young people and couples in general do not do well in this competition for housing. So access and supply are a problem as well as price. This seems like a crisis to me and not enough is being written about it. Rent increases of 30%+ are a real barrier to many.
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While owning a house is a good hedge against inflation, it’s not so good against a recession, especially if you are buying into a hot (probably bubble) market. An apartment opened up across the hall from D and BF, who are currently renting. D is at the beginning of a 5 year PhD track, so she will be at this location for a decent period. I looked at the numbers assuming I put 20% down, and after the mortgage, tax, hoa, insurance, I’d be upside down cashflow-wise if I charged them “market rent”. I might have been tempted to get them secure housing if I thought there was a reasonable chance of appreciation, but I think the risk of a correction is greater with mortgage rates going up and a possible recession looming. Maybe something sensible will come up in a year.
S lives in NYC with 2 buddies from college. Their lease renewal went to $7k/month from $6k. They live in a very high activity neighborhood but have no amenities. They gave themselves a $7k budget to find a 3bdrm with amenities in a “quieter” neighborhood, but it is not so easy even at that budget to find something.
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I heard manhattan rentals are running $100/sft per year from colleagues at work. That is just nuts.
My D20 has basically taken a vow of poverty (majoring in social work) 
and hopes to remain in Boston after graduation. There’s no way she’ll be buying a place any time soon.
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One question I have in terms of buying now v. buying later, is new building. In our area, they are building very very few houses. Most new homes are in the 2 million range ( and are overpriced relative to what is selling non-new in that price range). As long as people need housing and pressure on the cities has gone down, I don’t see prices falling that much in our area as long as the job market is strong. I do see houses that were selling in 24 hours taking a week or two to sell. Lol.
They are also building a number of apartments on top of commuter rail stations. These must appeal to the no car younger set. They sold quickly and I’ve seen more and more go up in the last five years. Luxury apartments within walking distance of the train.
Still huge demand in our area. House sign goes up coming soon and usually doesn’t get to 2 days before sold/pending sign is up.
One other trend I’ve seen is the towns that are less desirable in terms of school systems have risen in value. I think perhaps young couples are buying to get int the market with an eye to sell ones their kids reach school age.
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Yes, crazy, especially considering when the pandemic hit LL were desperate for tenants.
Yep, and now lots of people have to get back to the city for in-person jobs, which has made both rentals and sales competitive!
My son is a year away from entering the workforce. Likely in nyc. He said he won’t buy for a long time. His sense is it is poor value.
D lived in NYC for 5 years after graduation (she attended undergrad in the city). She lived with her BF (now H) and when they first got out of school and moved in together. It was in a very tiny (size of a dorm room) studio in Yorkville (clean, safe, "affordable " area on UES). After a year they moved to a non trendy area of Brooklyn and got a spacious one bedroom. They were not high earners - she worked in publishing and he was in healthcare management but literally started at the bottom being paid hourly. Several of her friends from school stayed in the city but they made compromises - small places, sharing with roommates, etc.
When D and now SIL left the NYC for a city in the midwest they initially rented but bought a house 2 years ago. They now both have MBA’s and good salaries but she was finishing grad school at the time they bought and so that was on one income.
S is in grad school in SoCal and rents a nice 2 bedroom with a classmate. It is very near the beach and the location can’t be beat. They each pay about $1900/month. The complex has a lot of nice amenities but it is an older building. I don’t know if he will ever be able to buy in the area he lives in now.
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I think you have to look at the underlying economic dynamics by location. Housing shortage/demand is an important factor, but I would also look at median household income, prevailing rental rates, what is the basis of the local economy and the source of the recent housing demand and surge in prices. The lower/riskier the economic basis for supporting housing values in the form of prevailing income and rental rates, the more housing prices are being driven by “outside” speculative money, the higher the risk that you are in a bubble situation.
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Yes, important to look at dynamics by location. But still there will be some guesswork involved regarding future factors. Those who plan to stay in the area a while will have less stress over those factors.
My D’s house in LA was bought last year with 10% down and a 600K mortgage. They can manage a 3,300 monthly payment but had they waited until this year and the rate is currently at 5%, it will jump to 4,600 monthly. And I thought it was too risky for them to buy then. What do I know?
The jobs they hold will always tie them to the LA area so I hope it’s a long-term plan.
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In my area (like many others) the real estate market favors sellers rather than buyers. In my small MA town (pop 6500) the median price of a home (and there aren’t many on the market right now) is $870K! .Even young professionals with good incomes have to stretch. Young people like my younger D (three years out of a grad school MFA program) who is an actor have no chance. My D rents in Brooklyn (I forget which part but it’s near Williamsburg) and can only afford her place because she has a boyfriend who makes a good income and can pay his share—D is able to pay her share because of a subsidy from the Bank of Mom and Dad. D also has lots of part-time gigs and pays for all her other expenses. It’s really tough for kids who choose a path that doesn’t lead to $$$.
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I wonder how many young adults consider the trade-offs between various locations and whether the HCOL in some cities is sufficiently offset by higher pay?
With WFH becoming more accepted, I wonder how many people will consider smaller, less expensive locations in order to afford a home or to not have to share an apartment with roommates.
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These were major considerations for my D’s friend group.
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I would hope that all college grads have the savvy to consider cost of living when considering job options. If not, they are in for a rude awakening.
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Would any of you advise your adult child to consider a different career in order to be self-supporting? Would they consider pursuing their interests as hobbies in order to switch to more lucrative profession?
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