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In Search of the American Dream

Author: Judith M. Wilson
September, 2017 Issue

Buying a house for the first time is a significant milestone for a young couple. It shows the desire to put down roots and become part of a community, and a home of their own gives them a meaningful place to make memories. For previous generations, buying a house was an expectation that followed graduation and marriage as part of a prescribed plan, but Millennials—defined as the population between 1980 and 2000 by Goldman Sachs—aren’t as likely to take that step. High prices are a factor, but culture also plays a role. Many young people simply don’t consider home ownership a priority and, at least for the moment, they’re staying away from real estate.
Of the three North Bay counties, Sonoma (with a median selling price of $514,250 for an entry-level home) is the most affordable for Millennials, but the search for a home requires determination and diligence.
Madison Williams and Duncan Howlett, both 29, started looking for a house in June 2016 and finally closed escrow on one in Santa Rosa’s Montgomery Village in May 2017. Williams began by finding properties on Redfin, a Seattle-based residential real estate company that provides data on homes all over the country on its website, and then visiting open houses. She and Howlett decided on the home they finally bought because of its location, school district and potential to gain equity as the market improves. However, they faced a number of challenges before finding it. Among them, the market was flooded with more mature buyers with greater resources, who pushed up bidding prices and made houses unaffordable for them.
Williams estimates she and Howlett submitted 15 offers before they were successful, and that included one deal that fell through while it was in escrow, as the result of an appraisal that showed the house was worth less than the owner’s asking price. Their quest continued, however, and “We ultimately wound up with a home that we love in a better neighborhood,” says Williams. After negotiations, they paid $485,000 for a house that was listed for $495,000, and the effort was worth it, because they now have a secure place to build a life together. “Having a place to raise a family, a safe place, somewhere we can grow a garden, have get-togethers and not have to worry about a landlord or a rental situation going bad is really a great relief,” says Williams.
Millennials are the first digital generation, so technology plays a big role in a house search, and Williams and Howlett found their realtor, Kimberly Sethavanish, online. Sethavanish and her husband and business partner James Colucci of Kimberly James Real Estate, Century 21 Alliance in Santa Rosa, are both 29. As Millennial real estate agents, they can relate to clients who are their peers. “It was really great working with Kimberly. Since she's the same age as us, we got along very well. It definitely made it smooth, knowing that she could understand our viewpoints,” says Williams.
“We work with a lot of Millennials,” says Colucci, observing that they choose when they’re going to enter the market and are willing to take their time. According to Colucci, Millennials sometimes delay buying a home while they save money for a down payment, but once they make the decision to go ahead, they do substantial research, using Google to check out mortgage brokers and finding reviews on Yelp. They take as much time needed to learn as much as possible. “They want to make the best decision; they want to make right decision,” says Colucci. The downside, however, is a process that can become a task, rather than an experience, so they don’t always enjoy the excitement of buying a first home as much as they might. He adds that Millennials in the market for a home are buying at the lowest level, and it’s very competitive, primarily because the inventory is insufficient. The only remedy is building more homes.

Marin dilemma

At the other end of the scale, a 1,408 square-foot mid-century modern home in Belvedere sold for $1,712,500 in June. The three-bedroom, two-bathroom house is the type that once would have been a starter home for a young couple, but it’s the rare Millennial who can afford such a steep price tag. “We’re definitely seeing Millennials purchasing homes in Southern Marin,” says David Jampolsky of Coldwell Banker in Tiburon, who encounters young people from the Peninsula and San Francisco moving to Marin because it’s such a desirable place to live.
He and his wife, Camille Jampolsky, also a real estate agent, recently had a very well-qualified young couple make an offer on their listing in “Old Tiburon,” which was listed at more than $3.9 million and ended up selling over asking price with multiple offers. They were relocating from the peninsula, where they were renting, and like most first-time homebuyers, they needed a substantial down payment to qualify for a loan. They are, however, somewhat of an exception in an exceptional area, says Jampolsky. For Millennials without deep pockets, high prices may be a barrier, and can limit the options in Southern Marin. It’s one of the reasons many young people who grew up in Marin appear to be settling elsewhere. “It can be very difficult to stay in the neighborhood when housing costs are so high,” says Jampolsky.
“The biggest problem with Marin is the affordability,” says Marty Wickenheiser, a realtor with Bradley Real Estate in San Rafael. She doesn’t see many Millennial clients unless they have jobs in technology or help from parents, and she points out that Marin will always be expensive, because the county has little space for new development. Compounding the problem, she’s seen Millennials competing for homes with empty nesters who are downsizing and have more resources. She also observes that young people aren’t all that interested in buying houses. “They don’t put a high value on it,” she says. Instead, they hop from job to job and pay a lot of money for rent or live with their parents. She sees 32-year-olds still at home and says, “They need to be nudged out of the nest.”
The result of Millennials staying out of the housing market in Marin is a graying population. “One out of four people is over 60, and that will be one out of three in 2030,” says Anita Renzetti, Director of Program Innovation at Whistlestop, the Marin non-profit organization that provides support and resources for seniors.
Part of that phenomenon is very likely the inability—or unwillingness—of people under 40 to enter the housing market, although Dr. Robert Eyler, the Marin Economic Forum’s chief economist, says that cause and effect is tricky to measure. As prices go up, it’s reasonable to think a somewhat older population is more competitive for housing due to their age and wealth accumulation, but younger people need to be able to purchase housing in Marin County as well, he explains. If too many of them lengthen the amount of time before purchasing their first home, it has consequences. Eyler points out, for example, that when a community has fewer families, it can result in a slowdown in the school population, although that hasn’t occurred yet. What has happened is the demand for rental housing has increased along with the price, and households have more occupants because young people are living together in shared accommodation to reduce costs. And that shifts consumption and wealth in ways that can be detrimental to individuals in the long term, because home ownership provides an asset that is a form of saving, especially if house prices rise. “Marin County remains a desirable place to live, but markets have done as they have in previous growth periods,” says Eyler, pointing out that Marin County leads the way, and young people commute to work or rent, rather than buy houses.

Napa’s appeal
The picture is brighter in Napa County, where young people are attracted to jobs in the wine and hospitality industries, and prices are lower. Brian Gross, a realtor with Heritage Sotheby’s International Real Estate in Napa, has worked with several Millennial clients in the past few months and reports that they’re buying what they can afford. Loans are available for almost everyone, so financing isn’t much of an issue, but Millennials often have to make concessions, and coming to terms with that can be a challenge. He recently sold a house to a couple who wanted turn-key condition, but others are willing to put in some work to make improvements if it gets them a house. Their criteria might be a preference for a single-story home, a certain school district or a specific neighborhood, but price is the defining factor. “Most people who are buying their first home are at the top of their price range,” says Gross. As a result, “They might settle for less house if it’s in a desirable neighborhood,” he adds. A further challenge is Baby Boomers who are downsizing and seeking one-story homes in the price range that appeals to Millennials, creating an increase in the demand, which, in turn, drives up prices. “You get competition from both ends now,” he says.


The United States is home to 92 million Millennials, and they’re the largest generation in the country’s history. Should they suddenly take an interest in becoming homeowners, it could lead to a surge in sales, and in the North Bay, it would also result in a jump in prices because inventory is tight, and it would be difficult to meet the demand.
Like much of California and the West Coast, Sonoma County has a shortage of both rental and ownership housing for workers. Part of this shortage is a result of under-building in the wake of the recession, but many factors have contributed to the problem. “The current market is tough for first-time homebuyers, especially Millennials, who are increasingly forced to commute long distances to find a home that’s affordable,” says Margaret Van Vliet, executive director of the Sonoma County Community Development Commission (CDC). Van Vliet notes that the housing shortage impacts families and communities, but also roads and the environment in general. According to Van Vliet, the Sonoma County Board of Supervisors recognizes these challenges, and has prioritized production of workforce and affordable housing. County departments, including the CDC, Permit Sonoma and General Services, have been tasked with finding new ways to spur production by the private sector, including on county-owned property.
Hugh Futrell, of Hugh Futrell Corporation, is a licensed general contractor, developer and real estate broker with a perspective on the potential social impact of the housing dilemma Millennials are experiencing. He believes it’s important for both society and the younger generation to become homeowners because ownership gives them roots in the community, and allows them to develop social ties. When they’re established, they participate in local politics, give to local charities and support schools. “If you’re not sure you can stay here, you can’t put down those kinds of roots,” he says. He points out that home ownership has financial benefits as well, because it’s the most common way to build personal wealth, manage one’s housing costs, build equity and take advantage of tax benefits. Thus, over time, ownership is usually the best way for most people to achieve financial stability, and it improves one’s ability to support a family and eventually retire successfully. “As a general rule, young families need home ownership,” he says, and he further observes that they need to have homes close to work. “Few things are more damaging to families than breadwinners who have extremely long commutes, and they’re away from home and children day in and day out,” he says, and yet it’s a very common situation.
Futrell acknowledges that Millennials have challenges. “They’re not a heavy presence in the entry-level buying population,” he says. According to Futrell, they face strong competition from Generation Xers (the adults just ahead of them),  who generally have more disposable income and are often looking for their first home, or in some cases income property. They all want the same things—safe neighborhoods, excellent schools, good design quality and a location not too far from the workplace. The supply is limited, though, leading to high costs. Futrell believes that’s part of the problem, and building more houses to expand the supply is the most normal and realistic solution, but it’s constrained by public policy. Young people must have the money to buy a house, however, and one of the biggest factors holding them back is student loan debt. “The student debt system is extremely destructive to the ability of Millennials to launch themselves successfully, including buying housing,” he says. A further impediment is a cultural attitude toward debt, which has resulted in many young people having a large credit-card debt load, making it difficult for them to qualify for loans and pay mortgages.

Finding their place

Millennials are still finding their place in the world, and while outside forces play a role in their decisions, their own attitudes do, too. Colucci finds that when his peers choose a home, character is one of the most important factors; they don’t want a cookie-cutter house. It’s an observation that gives insight into the thinking of Millennials. When it comes to home buying, they’re individuals who are going to do it in their own unique way. And if the pattern continues, that’s how they will shape the future of real estate.




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