Paradigm change: Young people and home ownership

Jim Burress Aug 10, 2012

Paradigm change: Young people and home ownership

Jim Burress Aug 10, 2012

Tess Vigeland: So we’ve talked about going in on a home purchase with friends and building one for yourself. Now let’s hear how the market is doing in one hard-hit city, Atlanta.

Low prices and mortgage interest rates should be prompting people to buy. But as Jim Burress reports from WABE in Atlanta, many young people say they’re simply not interested.

Jim Burress: These are three stories from young people, all making decisions on how they fit into this weird, unpredictable and chronically depressed housing market that now defines Atlanta.

Mary Hinkle: I am Mary Hinkle. I am 23 years old.

Mary grew up near Cleveland, Ohio. She says she never traveled farther than one state away. After high school, she wanted adventure. Mary convinced herself she’d find it at Agnes Scott College, an all-women’s liberal arts school.

Hinkle, giving house tour: The hallway, small. Clearly used to be the hallway for an upstairs half of a house.

Mary lives in a large old house across from her old college. It’s chopped into several small apartments. The rent’s cheap. She and a roommate each pay $300 a month. Mary calls it a practical decision.

Hinkle: I read all these gloom-and-doom things in the news about how people are still losing their jobs and their houses, and how 50 percent of people my age are unemployed or underemployed. And I worry, could it be me next?

I ask her that cliché question about home ownership and the “American Dream,” how what she just told me fits into her version.

Hinkle: I’m going to need think about that one for a moment.

It takes Mary one minute and two seconds to come up with an answer. Her American dream includes her cats. A career in astronomy. A garden and a large front porch.

Hinkle: But my version of the American Dream isn’t specifically tied to owning a piece of property that I stay in every single day. I could easily see myself renting an apartment for the rest of my life.

John Wiley: A lot of people see no problem with that.

John Wiley is a real estate professor at Georgia State. He says a decade ago, you’d never hear young people say they wanted to rent forever. But now, 20-somethings like Mary Hinkle know more bust than boom when it comes to housing prices. And that affects their view of homeownership, he says.

But once you reach folks in their early 30s, they tend to still remember the good times. Many are willing to commit if the price is right, like Kim Karris and her partner Dee Nalam.

Kim Karris: This is probably as big as big as my first apartment, this master bedroom.

The couple has lived in Atlanta for more than a decade. Like all Atlantans, Kim and Dee heard of insane deals on foreclosures and short sales. Dee says they had no plans to buy, but a realtor friend suggested they at least look. Then, they stumbled upon this foreclosure.

Dee Nalam: Because it was like, “Boom!” The moment we walked into this house, we were like “Oh my God! No. This isn’t happening.”

Karris: And I think it was a different feeling too, because when we walked in, it was like, “And we can do this? And this is this price?!” We, in our wildest dreams, never thought that this is something we could afford.

And by most standards, they shouldn’t have been able to afford this house. Built new in 2008, it sold for $395,000. Because it was a foreclosure, they scooped it up for.

Nalam: $199.

That’s $199,000, half what it sold for just a few years ago.

Wiley: Atlanta is a very affordable market at this point.

Again, Georgia State real estate professor John Wiley.

Wiley: And that’s one thing that influences someone to buy, “Can I afford it?”

How affordable is “affordable?” Wiley says the median home price nationwide is about $165,000. Here, it’s half that. And when it comes to condos:

Wiley: The median condo price in Atlanta is $54,000. And this makes Atlanta, of all the 55 metropolitan areas that’s tracked, it makes it the absolute lowest of all 55.

Like many big cities around the country, Atlanta’s real estate market is showing signs of life.

Jason Royal shows off the view from the 15th-story balcony of the condo he’s buying.

Jason Royal: You have Stone Mountain that way. You have Piedmont Park right here, so it’s like my new backyard. And then you have the whole Atlanta skyline. I don’t know, there’s a whole lot going on right here.

This view is one reason the 25-year old bought here. At $130,000, this 700-square-foot studio is well above Atlanta’s market average. But it would cost him more to rent in this neighborhood than to buy. Ultimately, his choice to purchase came down to a blend of practicality and emotion.

Royal: Throughout this process, I’ve thought when I’m old and gray, would I regret not taking this opportunity? And then I kept on thinking “Yes!” I want to live here. I want to wake up and see these views. I want to be able to walk out and go to the park. If I do not move here, I’ll regret it.

Jason’s not alone. In some Atlanta neighborhoods, buyers are bidding against each other for desirable properties. Inventory is dwindling, and the Case Schiller Home Price Index shows three months of consecutive growth. Tiny growth, but any growth here is welcome.

It appears Atlanta’s housing crisis may have finally bottomed out. And that might be just enough to entice young buyers to dive in, while prices are still cheap.

In Atlanta, I’m Jim Burress for Marketplace.

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