(From left) First-time homebuyer Sheron Johnson and her real estate agent, Jenn Cox, have been searching for a house since January 2020. (Photo by Monica Escamilla)
After more than two years of scrimping and saving, Sheron Johnson is ready to buy her first house.
A 29-year-old talent recruiter who lives with her mother in Manakin-Sabot, Johnson works remotely to save on gas and car insurance, found a way to reduce her phone bill to $25 a month and clips coupons religiously. Since the pandemic started, she’s built up her savings and now qualifies for a mortgage of up to $300,000.
She’s been in the market for a house since January 2020 — to no avail.
“I’m big on making a sensible decision,” says Johnson, who’s putting off marriage and a family until after she’s built some equity. “I want those 30s to be about me building wealth. Right now, I am just focused on building the foundation so that I can be a great parent.”
The housing market, however, isn’t cooperating. Inflation, the rising cost of construction materials and a dwindling inventory of homes is driving up home prices and forcing first-time homebuyers like Johnson to the sidelines.
Johnson’s real estate agent, Jenn Cox, says the market is so competitive that nearly every available home attracts 10 to 13 interested buyers. Often those other buyers are baby boomers with bigger savings and real estate equity looking to downsize, or people moving to the Richmond market from someplace else, like California or New York, with more financial resources. They forgo inspections and appraisals, at times bidding 20% or more than the list price. They bring more cash to closings.
“There’s just not enough homes to go around,” says Cox, who has more than 20 clients waiting to make their first purchase. “I have a database of first-time homebuyers for houses between $150,000 to $250,000, but of course, I can’t find them anything. I have people who are approved for $360,000 and up, and they are still waiting.”
Most of her clients are millennials like Johnson, in their late 20s and 30s. Born between 1981 and 1996, millennials surpassed baby boomers as the largest adult population in the U.S. in 2019 at 72 million. They are more educated (39% of millennials have some college education compared to 29% of Gen Xers, according to the Pew Research Center), with the lowest marriage rate of any previous generation. According to a 2020 study by Pew, 44% of millennials are married, compared to 53% of Gen Xers and 61% of boomers at a comparable age. Collectively, millennials have put off major life decisions until later in life — including having children and buying homes.
For years, demographers often referred to millennials as the “renter generation.” After the housing collapse that began in late 2007 and the ensuing recession, the idea of building wealth through the purchase of real estate lost its luster.
“What is unique about the millennial population is they were hit by recession at pretty key points,” says Ryan Price, chief economist for the Virginia Association of Realtors. During the 2007-2009 recession, “a lot of millennials were just getting out of college, out of high school. They were having a hard time finding jobs. They weren’t able to save,” Price says. Then the pandemic hit, forcing many to dip into savings just to stay afloat. Making matters worse, demand for new housing spiked in 2020, shrinking available inventory and pushing up rents. Just as young renters warmed to the idea of purchasing a home, they found themselves priced out of the market.
The pandemic also heightened the appeal of traditional single-family homes. With restrictions on public gatherings and the rise of working remotely, some moved out of condos and apartments in urban markets into more suburban areas. The most recent census figures confirm this trend, Price says. (Both Chesterfield and Hanover counties were among the top 10 jurisdictions in the state as far as population growth in 2021.)
While millennials have lagged previous generations in homeownership (38% of millennials between the ages of 25-34 owned a home in 2020, according to census data, more than 7 percentage points lower than Gen Xers and boomers at a similar age), they are now flooding the homebuying market, says Laura Lafayette, chief executive of the Richmond Association of Realtors. “Where demand is highest and the most intense is our first-time buyer market — anything under $300,000,” she says. It’s a trend that isn’t likely to change: “The market we have today,” Lafayette says, “is the market we are going to have for the foreseeable future.”
Forcing millennials out of the homebuying market could ripple through the economy for years to come. As baby boomers and Gen Xers move into retirement on fixed incomes, they lose disposable income. Middle-class, working families generally have more to spend on goods and services, which fuels the local economic ecosystem.
Key to building wealth, homeownership also strengthens neighborhoods and the broader social fabric.
“You want people to invest in the community,” says John W. Martin, president and CEO of the Southern Institute of Research, based in Richmond. “It’s harder, I think, for people to do that when they don’t lock into a place, a neighborhood that they can invest in, and build a support network.”
Residential developers, however, are finding workarounds. Shrinking new-home inventory has spurred an increase in condo and townhome development, especially in suburban communities. Young professionals and married millennials, Martin says, are predisposed to more urban-style developments.
“Higher density is a good thing. It just may be that out of necessity [the lack of housing inventory] puts more positive pressure on some of these alternatives,” Martin says, “and that’s good for the redevelopment of the suburbs.”
Johnson, the talent recruiter, has shifted her house-hunting focus to condominiums. She’s looking in the Midlothian area and likes the idea of not having a yard and the responsibility of taking care of a larger house. Moving into a condo now, she says, would allow her to build some equity — even if it’s for just a few years.
“I was looking at houses first, and I’m like, this is a lot of work,” she says, adding that condos don’t require roof repairs, gutters and all the requisite upkeep. “And if I get tired of it and want to move, I’ll definitely make some money off of it.”
