America’s Ongoing Housing Crisis Continues to Worsen
As the housing crisis grows to exponential proportions, do young Americans have any chance of getting a first foot on the property ladder? This article explores alternatives for first time buyers as millions of young couples continue to raise their children in shared accommodation.
Millennials can’t afford houses. The world has readily admitted this for years now, yet nothing seems to change. The housing market spiraled out of control after Covid-19, as people realized that their home really was their castle. Unfortunately, those castle-like process have done nothing to help an already swollen situation. With property owners charging exorbitant prices and banks refusing to lend mortgages without unaffordable down payments. The situation has created a boiling point for Millennials, who are still sharing apartments even decades after education.
Here’s what you need to know about the ongoing housing problem in America and how Millennials are getting around it through shared accommodation.
How Bad is the Housing Crisis in the US?
Back in July, the New York Times ran a story about the ‘increasingly national problem’ of the housing shortage. In this article, they maintain that the housing problem happened in coastal areas before then. Coastal areas are a more desirable property market in the US, but the housing crisis is far deeper than that.
With estimates saying the US is ‘short’ around 3.8 million homes, the lack of housing across all states is due to lack of demand. The lack of demand isn’t the result of a lack of people who want to buy a house, it’s about a lack of affordability. Home prices have risen exponentially in the last decade. The average 2.4-person family can no longer afford a house of their own, even on a double salary.
Nevertheless, the flip side of the housing market is seeing Millennials finally overtake as the largest group of new home buyers in the northern US. How are savvy Millennials making the savings to buy their own home, while others of the same generation are falling behind. Is it down to luck? Or is it down to rent sharing and patience?
How do You Save for a House as a Millennial?
There are more than enough articles out there that claim cutting out expensive coffee and visiting the bank of Mum and Dad are all it takes to save for a house. Millennials save for years – if a decade – to get enough cash to pay a down payment on the average median house price. At the time of writing, the median house price was $428,700 with the expectation of a 20% deposit. CNBC already did the math on this. The average millennial has about 26% of their income leftover. The average income is $85k annually for this age group but remember that a handful of higher paid people will push that figure upwards.
If you saved every spare cent you had for four years, you might have enough for a mortgage. How feasible is it that you would save that much money every month? Even if you save half that amount, the time to save increases to 8 years. That’s a long time to save for a home. So how do you push the amount you are saving upwards to help you get your house faster? House sharing is one of many ways Millennials are making it into the housing market.
To keep up with the disparity between home ownership of Millennials and their predecessor generations, savvy savers are:
- Renting properties together
- Sharing property ownership with a partner and immediately renting a room
- Renting outhouses and buildings after a large initial loan
- Turning to the app market for saving technology
Can you sublet your apartment legally?
Subletting your apartment means letting out a room from an apartment that you are renting. Some lease agreements prevent this and some allow it. Subletting means you rent out a room to a room mate and they pay a share of the bills on your behalf. The rules about this will change depending on your state and your lease. The law defines a guest as someone who stays for less than 15 days. After this, you may need to declare it to your property owner. You can visit this page to find out more about someone living with you even if they are not on the lease.
The current median rate of renting a small two-bedroom apartment in the US is $1295 per month. Sharing this bill with a second, third, or fourth person, could be the saving you need to buy your own home faster.
Do you still have rights if you are not on the lease?
Even if you don’t have your name on the lease of a house, you still have rights to protect you. For example, you have rights to protect you against harassment from the person who does pay the rent. You may be a tenant at will in the eyes of the law, which means you do not have the same number of rights as the tenant themselves. Seek legal representation from a Los Angeles tenant lawyers if you are uncertain or if you feel your rights are at risk, lease or not.
Can you rent out a room in your new home to help pay for the mortgage?
You can rent out a room in your home to help you pay for the cost of your mortgage. A single room can raise you anything from $300-$800 per month in extra income. That’s a significant contribution towards your mortgage. You can get more for a room with a private entrance, ensuite facilities, or other exceptional circumstances. The laws on how to legally set up a tenancy agreement in your state differ. As with before, you could set up a tenancy at will agreement, which is when either one of you can terminate the informal lease agreement at any time.
Is there an end in sight?
The housing bubble does seem to be bursting. House prices are level, if not falling. Although Millennials will eventually evolve into the homeowners of tomorrow, today is the time for saving. Today will be the day for saving for a long time to come.