Faced with rising home prices and student loan debt, some cash-strapped millennials who don’t have family support are teaming up with friends to carve out a path toward homeownership. About 4% of first-time buyers purchased homes with housemates from July 2018 through June 2019, according to data from the National Association of REALTORS®. That is double the percentage from a year ago.
“There’s a lot of people who are looking at homes today and saying, ‘I can’t afford this by myself. I’m [on a] single income. How can I get into a house?’” Jessica Lautz, NAR’s vice president of research, told realtor.com®. “Finding someone who’s renting currently and matches your ideal [co-buyer profile] sounds like a great idea. Why not have a stable home and gain equity at the same time?”
For example, Kelsey Perkins, a single mother of two, told realtor.com® she was able to purchase a $470,000 five-bedroom home last year in the Denver area by purchasing with two friends. They live in the house together, and each person pays just under $900 a month to cover the mortgage. Additional expenses are split. “What we could do collectively was much more than we could do individually,” Perkins told realtor.com®.
The cobuying trend is likely to expand beyond urban centers, Lautz predicts. The trend will likely gain momentum as more millennial buyers move to small towns in search of affordability, she adds.
But as these arrangements grow, real estate pros caution that negotiating the living arrangement can be tricky. Michael Soon Lee, a broker-associate with Realty One Group in San Ramon, Calif., says there are many issues to consider when buying a home with housemates, such as whose names go on the title, who’s responsible for collecting and making mortgage payments, and who will oversee maintenance and repairs. Cobuyers will need to have a comprehensive legal agreement to determine each person’s responsibilities and plan an exit strategy in case one or more parties want to end the arrangement, he says. “[Cobuying] is a business transaction, even if it is done among friends,” he told realtor.com®. “Compromise is the ultimate word. You’re looking for people who are flexible and have the greater good in mind. Those are the people who make this work the best.”