Millennials are taking the plunge into homeownership together. According to real estate analytics firm Attom Data Solution, the number friends buying homes together went up by a whopping 771 percent between 2014 and 2021.
The economic repercussions of the pandemic have made friends more likely to consider cohabitating. It is also a way for Black millennials to start building wealth and help close the wealth gap.
“During the pandemic, people have been renting, and they may have wanted more space, and so they looked at, perhaps, their roommate and decided, ‘Let’s go buy a home together,’” said Jessica Lautz, vice president of demographics and behavioral insights for the National Association of Realtors, told Business Insider.
Millennials Adopt the Buddy-Buddy System To Buy Homes
Young people are falling behind other age groups when it comes to owning their own homes. Apartment List’s 2021 Millennial Homeownership Report notes that by the age of 30 in 2021, 42 percent of millennials own a home. That’s lower than 48 percent of Gen Xers in their 50s and 51 percent of baby boomers in their 60s.
Student loan debt and stagnant wages have caused people in their 20s to delay milestones like starting a family or buying a home. The wealth wage gap has been especially hard for African-American millennials, who make 60 percent of what their white counterparts earn, according to Business Insider.
So as an option, some millenials are pooling their resources to buy a home together.
“Millennials are crushed by huge amounts of student loan debt. Prices in the housing market have skyrocketed. They’re getting married later in life, but they might not maybe necessarily want to live alone. And so it makes sense financially for millennials who want to buy into the housing market to do so with friends,” said reporter Alex Janin on a Wall Street Journal podcast on why young people might want to pool together money to buy homes.
Make Sure to Talk Money
On the financial side, friends should make sure they’re both financially fit and financially responsible. According to Rocket Mortgage, friends should check each other’s credit scores before applying for a joint home loan. In a joint home loan, both applicants’ credit scores are checked while applying for a loan.
Even if they have enough good credit to buy a home, they have to make sure they both maintain good credit. If the homeowner’s credit or their friend’s credit score drops, their monthly mortgage payments may go up.
Friends buying a house together should also draw up an ownership agreement with a lawyer to make clear how the mortgage and bills will be divided among them. The agreement should also have a contingency plan of what to do if one of the friends is disabled or dies.
Can Your Friendship Handle Joint Homeownership?
There are many things to consider before buying a house with non-family members. Friends who buy should have a good relationship that can withstand the numerous challenges of living together and being co-property owners.
Your personalities also have to mesh. “Are you good at conflict resolution? Do you have everything down on paper to mitigate any circumstances? Do you have trust in each other? Do you know each other? Are you people that know what you want out of this?” asked Janin.
Owning property together can also strain a relationship.
“Most of the people that I spoke to, they were not ignorant to the fact that sometimes friendships end, things happen, and most of them had contingency plans for what if we need to get out, when will a forced sale happen? When will we sublet the space? These are things that are written into their co-ownership agreements,” said Janin.
When friends decide to buy a house together, it can be a great way to save money, build equity, and be more financially secure. However, Black millennials have to be cautious and make sure that buying a home together will help and not hurt their finances or relationships.