Even before getting engaged last year, the East Bay couple had been anxiously budgeting, unsure if buying a house in one of the priciest regions in the nation was feasible. In August, the median house price for a home in the Bay Area was $1.3 million, according to the California Association of Realtors — with mortgage payments that are more expensive than renting and a stretch for two young professionals. In the end, it was possible, but not without some number crunching and serious doubt.
Those concerns are particularly pronounced for Millennials like Ton and Wong, with claims by some economists that they’ve fallen behind other generations in financial standing. But while previous research indicated that Millennials may be too poor to own homes, more adults in their 20s and 30s are beginning to dip their toes in the housing market. And, for many, it’s coming after moving back in with their parents.
The National Association of Realtors also reported this year that 28% of younger Millennials lived with parents, other family members or friends right before purchasing a home.
“This is higher than any other generation,” a briefing of the report said, attributing it to young adults trying to save for a down payment as they were looking for a home.
Ton and Wong are among them, having just closed on a property this summer.
“We were not planning on moving back home initially,” Ton said. But when COVID-19 hit, the couple’s housing plans with friends fell through. Moving back in with each of their parents in the East Bay seemed like a good, temporary plan — a rare opportunity for family time in the midst of pandemic uncertainty.
And while it meant being separated from each other, there were some financial perks to make up for it: No commuting costs, thanks to remote work. No work lunches. And no more Bay Area rental rates, which is annually ranked as one of the highest in the country.
“Being able to stay at home really helped us out,” Ton said, noting that they were able to buy a home three to four years earlier than they had budgeted. “I think it put us in a really strong purchasing position.”
The couple isn’t alone, joined by a generation of other young adults who were forced into the same situation over the course of the pandemic. In July 2020, Pew Research reported that 52% of young adults were living at home with their parents, a jump from the 46% reported in January earlier that year. It was the first time that census data recorded more adults ages 18-29 living with their parents instead of with roommates, partners or on their own, the study said.
And similar to Ton and Wong, the path back to childhood homes has allowed many Millennials to gain better financial footing. A 2020 study by Bank of America found that Millennials were saving more than ever before — 73% of respondents said they were able to add to their savings during the pandemic, up 10% from two years ago. Nearly 40% said that they were able to boost their credit score, and 27% said they were able to reduce their spending during the pandemic.
“I think it’s also because we couldn’t do anything (during the pandemic),” Ton said. She also attributes their increased savings to social distancing measures, which led to a dramatic drop in consumer spending. “Expenses that went away with lockdown really put us in a better financial position.”
It’s a stark turnaround from previously recorded data, which suggested Millennials had some of the poorest spending habits and credit scores compared to previous generations. Despite making up 22% of the population, the Federal Reserve reported that Millennials owned a little over 5% of all U.S. wealth last year. A 2016 report by TransUnion also found that 43% of Millennials said they had subprime credit, and a 2019 study by Bankrate found 58% of Millennials were turned down for a loan — although that number was cut nearly in half in 2020.
Those numbers are part of the reason Millennials have had the lowest homeownership rates relative to other generations, although they now make up the largest share of the housing market, representing 37% of homebuyers.
“I think it was the case that the Millennial generation was hit rather hard and for a long time by the financial crisis (in 2008) and the Great Recession that came afterwards,” said James Wilcox, a professor of economic analysis and policy at UC Berkeley. He points out that many Millennials graduated in one of the poorest job markets of the decade, peaking at 16.2% unemployment for young workers in 2010.
But despite the recession that slugged them in the prior decade, Wilcox thinks that COVID-19 — and the exodus that resulted from it — was a game changer for some, particularly Millennials who had a stable income. With scant opportunity to spend their paychecks in a remote world and some of the lowest mortgage rates in the past 50 years, it was a sign for many to head home and begin moving into the housing market themselves, as Wong and Ton did.
“I think many (Millennials) may have been putting home ownership off,” Wilcox said. “And when all of a sudden mortgage rates went under 3% and they still had jobs and were saving more, I think we saw … some catch-up from the past and some telescoping of future demand. Adults who said, ‘Well, we’re going to buy a house sometime in the next few years, but a 3% mortgage rate and a job that doesn’t require me to be close to downtown?’ Makes it time to move to the ’burbs.”
The improved homeownership rates are a sign that Millennials are beginning to settle into adulthood, although Ton admits that the process of saving up at her parents’ home hasn’t come without its struggles.
“I respect that it is their home and I do follow their rules, but I have to answer the five Ws every time I go out,” Ton said, referring to who, what, when, where, why.
Despite some of its challenges, Ton and Wong have called the past year and half a valuable experience — more home-cooked meals, more time with the family, as well as the family dogs. And most important, it’s led to the couple settling into their own space in the East Bay. Under a fixed mortgage, they say it’s a relief to no longer have to worry about San Francisco’s rising rent prices.
“It feels surreal,” Ton said. “Overall, we have no regrets with how things turned out.”
Jennifer Sor is a San Francisco Chronicle staff writer. Email: email@example.com Twitter: @jennifer_sor