Today, everything from a movie ticket to college tuition is more expensive than it was a couple of decades ago. And the wages aren’t rising as fast as the prices.
Freddie Smith, a realtor from Orlando, Florida, says this is especially visible in the housing sector.
Earlier this month, Smith released a TikTok video, where he breaks down the math of why Millennials have a harder time buying a home than Baby Boomers did.
The numbers look pretty grim, and the worst part is that you can’t really argue about them.
This realtor really feels for Millennials when it comes to housing
Image credits: fmsmith319
So he released a comprehensive video for other generations to get a better idea of how the current housing market differs from what it was a few decades ago
“Any time a millennial is trying to explain this to a boomer, they always use the same example. They go, ‘well, my interest rates were 15%, you have six and a half, you’re so lucky.’ Well, let’s look at it this way.”
Image credits: fmsmith319
“If you bought a house for $80,000, back in the ‘80s, a 20% down payment would be 16 grand, and the average person was making around $30,000 back then. So your down payment was just half your yearly salary.”
“And then the loan you would have on it would be about $60,000. So in order to pay off the $60,000, if you really wanted to, it’s just two years of your salary, and you could have your house paid off.”
Image credits: fmsmith319
“Well, let’s fast forward to 2023 and I live in Orlando, so I’ll use this as an example. A $400,000 house with 20% down would cost $80,000. Just as the down payment. The average person makes $50,000.”
“So it’s almost twice their yearly salary just for the down payment, then they’ve got a $320,000 loan left that they have to look at.”
Image credits: fmsmith319
“That’s nearly seven times their salary to pay off the loan, regardless, and then you go ‘well, 15%, we had a higher payment.’ All the people buying houses right now, I’m a real estate agent here, so I see this all the time.”
“It is incredibly rare that people are putting 20% down, people are putting three to 5% down, which is what the 6% interest rate is still shooting the mortgage through the roof. People’s payments on these homes are $3,300, $3,500 a month, on an average, simple, three-bed, two-bath home. So that’s the difference.”
Image credits: fmsmith319
“Millennials are complaining and people can’t get mortgages. I don’t know the answer to it. But I’m in this stuff every single day and most of our clients, I’m not kidding you, are in their 50s, 60s and 70s.”
“It is so rare for us to see a millennial or especially anyone younger, except a couple the other day, and the agent pulled me aside and said ‘hey, they gotta send this video to their parents because they’re the ones paying for it.’ Good for them. That’s awesome. But that’s the situation that millennials are in.”
The video has been viewed over 4.8 million times
@fmsmith319 Replying to @JosiahFuerte ♬ original sound – Freddie Smith
Image credits: fmsmith319
The situation is even worse compared to what it was a few years ago
Smith has been working as a realtor for one and a half years, and in that time, he’s noticed that many older people just don’t understand how unaffordable even a “starter home” can be for younger buyers.
“I believe the biggest misconception is the overall affordability,” he told BuzzFeed. “Even if we just look at the past three years in Florida, the market has pushed out a large percentage of first-time homebuyers, including many Millennials and Gen Z.”
Smith gave an example to illustrate how quickly the costs have risen just in the past three years. “In 2020, a home would sell for $320,000 at a 2.5% interest rate, which would be about $1,200 per month. The individual would have to earn about $60,000 per year to be considered for that loan.”
“That same home in 2023 would sell for $550,000 at a 7% interest rate, and the monthly payment would now be $3,800 per month. That same individual would now have to earn $130,000 per year to be considered for the loan,” he explained. “Even if the buyer can be approved, it is still a huge chunk of their income for housing, which then limits saving and investing for the future.”
Image credits: Mikhail Nilov (not the actual photo)
Millennials have been renting a lot
Some people point to a study by RentCafe, which found that in 2022, Millennial homeowner households became a majority among the generation, at 51.5 percent.
And it’s true, over the past five years, about seven million have joined the ranks, bringing the total to about 18 million — that’s more than triple the gains of Gen X (born 1965 to 1980), which added two million new homeowner households, for a total of about 24 million.
However, Millennials still own fewer homes than older generations do. Baby boomers (born 1946 to 1964) are still leading the rankings, with about 32 million homeowners among them.
And that’s quite telling, when you consider the fact that Millennials were the largest generation group in the U.S. in 2022, with an estimated population of 72.24 million.
No wonder that a survey from Apartment List found that in 2022, 24.7% of Millennials said they plan to “always rent” rather than buy a house.
Image credits: Kindel Media (not the actual photo)
The now-viral TikTok really resonated with people
Freddie Smith added that from the 15,000 comments, he gathered that, “Most Millennials are feeling the pain, not only from housing costs but overall inflation. The older generation, not to pick on them, but reading the comments, some seem to be out of touch. They continue with the typical, ‘If you just work harder,’ ‘cancel Netflix,’ ‘make coffee at home,’ you could afford a house.”
“I think two things need to happen at once,” the realtor said. “We need to figure out as a people, all ages, how to slow down and decrease inflation and simultaneously keep living our lives, working hard, and surrounding ourselves with people that make us happy.”
“I do think millennials are the generation that will turn this ship around; it’s just a matter of time.”
They certainly seem like the ones who know how to deal with hardship. After all, the oldest of the cohort became adults facing the housing crisis and the Great Recession of the late ’00s, and the youngest graduated from college right into the pandemic.
Image credits: RDNE Stock project (not the actual photo)
Smith’s video really resonated with people, and inspired many to share their personal stories
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