Millennials Purchasing Tiny Condos In Order To Own Real Estate

Millennials, even those with jobs that pay well are having a tough time entering the real estate market.  Entering into the workforce en masse during the Housing Bubble after being saddled with a historic amount of student loan debt, they have endured the slumping job market post-Great Recession.  As a result of these trends, Millennials haven’t exactly been chomping at the bit to buy a house.  Even their rental habits reflect the changing tastes of a generation with different values than their parents.

The latest real estate trend that has garnered mainstream media attention involves tiny condominiums that have appeared on the market in metro areas.  These diminutive living areas are being marketed to Millennials as a point of entry for them into trendy metro areas they would not otherwise be able to afford.   Diana Olick of CNBC reports:

As more millennials graduate into better paying jobs, marriage and parenthood, real estate developers are doing all they can to entice this renter-nation generation in home ownership.

Well… they aren’t exactly graduating into marriage and parenthood.  Really, they are reaching the age range that has historically been associated with beginning marriage and parenthood. However, Millennials have been putting off marriage, home ownership and even family formation as economic and social trends have changed significantly from past decades.

That means making urban homes more affordable, which means making them smaller. The tiny house movement may still be something of a novelty on home-remodeling TV shows, but in downtown Washington, D.C., as in other major cities, the tiny condo movement is moving quickly into the mainstream.

“They definitely notice it’s smaller, so it is an explanation; it takes a little bit of an adjustment,” said Chris Ballard, principal at McWilliams/Ballard, a marketing firm. Ballard works with the Peterson Cos., the developer of Ontario 17, a new condominium building in D.C.’s young and vibrant Adams Morgan neighborhood.

The condominium building, whose exterior is still getting finishing touches, is about 70 percent sold. While its penthouse units went the fastest, its tiny studios, barely bigger than 300 square feet, are getting serious millennial attention — especially with a price point of just $275,000, about half the neighborhood’s median price, according to Long and Foster Real Estate.

“Things are getting smaller, and people are starting to understand,” said Laina Lee, one of the sales managers at Ontario 17. “About 80 percent of all our buyers, including our studios and our one-bedrooms, have all been first-time homebuyers.”

First-time homebuyers have been very slow to come back to the housing market post recession. They are still barely about a third of home buyers, when historically they make up more than 40 percent.

Rising faster than inflation, home prices shot up by 4.7 percent nationally in July from a year ago, according to a report released Tuesday from S&P/Case-Shiller.

“A slower rate of price gains is needed in order to make buying a home a more competitive option to renting,” wrote Peter Boockvar, chief market analyst with the Lindsey Group, in response to the price report.

Young buyers have been forced to rent, but historically high rents prevent them from saving for a large enough down payment.

At under 400 square feet, the condos attempt to maximize what little space they have; they come with Murphy beds with bedding storage, compact appliances and a dining table that folds up into a picture frame.   The living/dining area doubles as the sleeping area and you will find none of the bells and whistles that usually accompany trendy condominiums such as a pool or gym.  All of this is in an effort to market to Millennials, some of whom have even shown interest in condos under 300 square feet.  Young Americans still remember the Housing Bubble of the mid-2000’s and I wouldn’t discount the idea that we may see another one in the next few years.

While a shift in priorities from previous generations has much to do with this, make no mistake, this trend is also a result of the economic challenges that Millennials face. Stagnating wages and rising costs have forced millions of young Americans to share living space with their parents.   They are further compromised by mandatory contributions to Social Security, which effectively serves as a tax to redistribute their wealth toward Baby Boomers and the federal government.  With all of these trends in place, how much time will pass before young Americans become mad as hell?   As things stand now, Millennials have far less personal wealth than their predecessors, less economic opportunity and, whether they want it or not, less space to live.

-R.J. Renza, Jr.

Please take a moment and sign the National Petition to Opt-Out of Social Security. The more signatures we gather, the more pressure we place on Congress and our political leaders.

August marked the release of my first e-book “How Are You Not Angry Yet: How Social Security is Destroying the Futures, Finances and Hopes of Generations X,Y and Z and How We Can Put and End to it,” which takes on Social Security from the perspective of young America in a visceral and humorous way.  “Angry Yet” breaks down the complex topic of Social Security into a way that most Americans can easily understand and find entertaining and is available here.

I was recently mentioned by my favorite economic blogger Michael Shedlock in his post “Question To Millennials: Why Are You Not Mad As Hell Yet?”

I also appeared on The Debt Dialogues, the weekly podcast of “RooseveltCare” author Don Watkins:

Check out my video of how I celebrated Social Security’s 80th Birthday and What Social Security Does To Kids.

You can also follow me on Twitter at https://twitter.com/takebackyoursix

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