Some millennials pursuing a mortgage before a ring
More than ever, unmarried couples are buying first homes together
When Alex Mackay and Laura Palmer first learned they’d both matched with residency programs at Houston hospitals shortly before graduating from medical school in 2017, they began pondering one of life’s biggest questions: “Where should we buy our first house?” Never
mind that they had yet to ask and answer other biggies, like “Will you marry me?”
A generation back, that would have caused an epic stir in Palmer’s family.
“My mom’s sister and my Nana had a falling out because my aunt
moved in with a guy before she was engaged,” Palmer said one evening in mid-July as she and Mackay relaxed in the three-bedroom house they bought last spring off Martin Luther King Boulevard in the city’s south side.
This time, it barely
registered. Palmer said she was afraid her Nana was going to be mad. Instead, “she was like, ‘Yeah, that makes so much sense. That’s so economical.’”
Palmer and Mackay are representative of a much larger — and steadily growing — trend. As millennials defy long-standing norms by delaying mar-
riage and choosing cities over suburbs, they’re still as likely as their parents to view homeownership as a key component in building wealth. But the best-educated generation in American history is also saddled with record levels of student debt and stagnant wages, which means saving up for a down payment while interest rates are still historically low isn’t easy. So many millennials are buying with their romantic partners — even if they haven’t yet taken other big steps like engagement or marriage.
“Among first-time homebuyers, we have the highest share we’ve ever recorded as unmarried couples,” said Jessica Lautz, the managing director of survey research at the National Association of Realtors. “And it’s a trend that seems to be on the rise as well.”
Back in the 1990s, only 8 percent of first-time homebuyers were unmarried couples. That share has since doubled to 16 percent, according to data from NAR. At the same time, there’s also been some growth in another demographic: friends who are buying together, though that share is much smaller, up to 2 percent now from 1 percent in the 1990s.
“It speaks to affordability and also the overall drop in marriage rates,” said Lautz, whose research focuses on demographic trends influencing the housing market. “It’s very common to not feel like you need to be married to purchase a home.”
Shifting marriage norms
It also speaks to the mindset of America’s largest generation — the more than 70 million people born between 1981 and 1996.
“Millennials are very smart,” said Natalee Kelaher, the Houston Realtor who represented Mackay and Palmer in their purchase last spring.
She would know. She sells houses near the Texas Medical Center, where young residents often come for four- to five-year stints. Sometimes she represents married couples, but often her young buyers — such as Palmer and Mackay, who are 29 and 27, respectively — haven’t yet made that leap.
“They’ve seen failed marriages. They’ve seen people lose their jobs and lose everything. So I think they’re gun shy with jumping into a marriage. I’m Gen X, and how many of us are divorced now?” Kelaher asked. “I think that traditional societal expectation of you get married, you buy a house, then you have a baby, that’s just not a thing as much anymore. But why throw away $20,000 a year in rent for 800 square feet when they could have a nice home and build equity?”
That’s essentially the conversation Palmer and Mackay — who became engaged a few months after their home purchase, and are currently planning their September wedding — had when they were considering their real estate options. Living in two homes would mean leaving one empty most of the time. Because even if they weren’t yet engaged, they were serious about each other after more than two years of dating.
“I wanted to make sure that if I was buying a house with someone, it was someone I could see a future with. Because what happens if you break up? And our Realtor even said that,” Palmer said. “She told us that buying a house together, you basically have to go through a divorce if you’re going to separate and not be in that house together, because you’re both on the mortgage.”
And they’d broached life-altering decisions together before: In September 2016, when they applied for residencies, they made the conscious effort to end up in the same city.
That’s how it goes much of the time. But some of the rise in buying homes before marriage is less about a shift in societal expectations and more about pressing financial needs, Lautz from the NAR said.
“Student loan debt is a huge issue,” she said.
‘Creative’ living
Forty-one percent of first-time homebuyers have college debt, Lautz noted, adding that she can’t overstate “how large of an issue student loan debt is to homebuying today, especially when coupled with affordability.”
Among millennials with student debt, the median amount is $41,200, according to a 2017 report by the NAR and American Student Assistance. That’s more than the $38,800 median annual income measured for this group. And 76 percent of borrowers believe their student debt has impacted their ability to purchase a home. By a lot.
“The median delay is seven years,” Lautz said.
So while the average age of marriage has risen steadily — up from 27 for men and 25 for women in 1996 to 29.5 for men and 27.5 for women in 2017, according to the Census Bureau — those extra years don’t account for all the time young adults spend trying to get their finances in order.
This has forced millennials to get creative. Houston Realtor Quinntonia Berry has seen more clients looking to buy not just with romantic partners, but also with friends.
“More and more, I’m seeing friends who are like, ‘We’re already sharing an apartment.’ They’re starting to buy homes together, because they can buy more of a home that they like that they otherwise wouldn’t be able to buy,” she said. “Because a lot of times, they’re not making a lot. Like, at most, they can afford $150,000. And in Houston, it’s very hard to find a house that’s nice for $150,000.”
As in, near impossible: The median price of a home sold this June was a record $245,000, according to the Houston Association of Realtors.
“The main reason is always the same: They can’t afford the house they want by themselves,” Berry said. “And that makes sense.”
But many millennials are fluent in financial creativity. Much of this generation came into the workforce during the Great Recession. These are the young adults who embraced the term “side hustle” selling cat sweaters on Etsy and turning their cars into Uber vessels to make ends meet. They find wills and make ways.
“There’s always a way to get something you want,” Berry said. “It’s just like in business. If someone has a business, and they know they can’t do something by themselves, they bring in a partner. If they can’t buy a house by themselves, they bring in a partner. It’s a creative thing.”
And as societal expectations have changed, Berry thinks millennials have felt freer to go their own way.
“The traditional sense of marriage and the way things ‘should’ be done is disappearing,” she said. “There’s always going to be someone saying no, but you have to look through that and see what’s right for you — not what’s right for everyone else.”
Still, buying a home is a big commitment. And Berry and Kelaher both stress the seriousness of going in on a mortgage with someone else.
“I always ask: Have you thought about all aspects of this? I let them know that this is not like a husband and wife situation, where if you get divorced, certain things happen. There’s no friendship divorce,” Berry said. “You need to be on the same page.”
Simple process
If both parties are buying the house together, like Palmer and Mackay did, it’s a relatively easy process — no different than if they were married, said Christina Gobe, senior loan officer at Envoy Mortgage.
In the 13 years since Gobe began working in the mortgage industry, she estimates the number of unmarried couples she works with has doubled or tripled.
“Not being married really doesn’t change anything. We can get them qualified,” she said. “They just sign two separate applications, instead of one application with their names on it. And we pull two separate credit reports, instead of having a joint credit report.”
But the issue can become complicated if one partner is not on the loan, Kelaher said. And that does happen from time to time.
“Maybe one of them doesn’t qualify for the loan, but maybe mom and dad have given them $5,000 or $10,000 and they’re paying the down payment,” she said. That’s when things can get dicey. “They need to make sure they’re protected financially if whatever relationship they’re in falls apart.”
She recommends contacting a real estate attorney and creating a legal document that spells out each individual’s rights should the relationship crumble. Adding the second person’s name to the title after the closing is also relatively easy and affordable, she said.
At the end of the day, if that’s what it takes to make someone feel comfortable buying a house, then Kelaher feels it’s worth it.
“I think it’s a great idea,” said Kelaher. “I think more people need to do it, because these rent rates are out of control.”