On a police officer’s salary, Jakia Morton, 29, bought a brand-new townhouse last year for $265,500 in East New York, Brooklyn, near shopping, public transit and a community of first-time buyers.
Good luck finding the same: Ms. Morton was one of 12,200 applicants to apply for 83 affordable homes for sale in the city-subsidized development, a record for the program. That’s the equivalent of competing with 146 other prospective buyers for her home.
Home buying for most millennial New Yorkers, those born from 1981 to 1996, can feel like a bait-and-switch. Yes, mortgage rates are near record lows — in large part because of the coronavirus outbreak, prices are falling and negotiation is common. But the homes that young buyers can actually afford — because of lingering student debt, high cash requirements before and after closing, and restrictive lending rules — are just a fraction of the market.
Despite the obstacles, millennials are making inroads where the right mix of inventory and little-known programs for first-time buyers are helping them clear financial pitfalls. They are searching farther along subway lines, borrowing from their retirement funds and from family, and considering all their options — co-ops with nit-picky boards, income-restricted apartments, and even the rare house or condo within their budget.
The odds are not in their favor. In a five-year analysis of recent census data, 91,585 homes in New York City were owned by millennials — just 9 percent of all homeowners — and they earned a median household income of about $108,000 a year, according to the research firm Social Explorer. The median household income in New York was around $63,800 in 2018, and about two-thirds of households in the city rent, according to data compiled by the New York University Furman Center.
Millennials nationwide, by contrast, represented 38 percent of home buyers in 2019, and have been the largest generation of home buyers for seven years, according to the National Association of Realtors, a trade group.
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New York millennials also lag behind past generations of home buyers, when they were the same age. In an analysis of 25-to-34-year-olds, Social Explorer found that only 11 percent of New York millennials were homeowners in 2018, compared to 15 percent of Generation-X in 2000, and 17 percent of baby boomers in 1990.
“They’re off to a late start,” said Jonathan Miller, a New York real estate appraiser, largely because of the financial hardships they face. Many entered the job market soon after the Great Recession, stunting their income growth, just as a luxury real estate boom in the city pushed up prices in an already expensive starter market, he said. From 2010 to 2019, the median sale price of a Manhattan studio apartment rose to $475,000, up 23 percent from $384,800, according to an analysis by his firm, Miller Samuel.
Millennial Buyers in New York City
The areas with the largest percentage of millennial homeowners, ages 22-37, from 2014 to 2018.
Murray Hill, Gramercy, Stuyvesant Town
Chelsea, Clinton, Midtown
Brooklyn Heights, Fort Greene
Battery Park City, Greenwich Village, SoHo
Concourse, Highbridge, Mount Eden
Morris Heights, Fordham South, Mount Hope
Washington Heights, Inwood, Marble Hill
Pelham Parkway, Morris Park, Laconia
Howard Beach, Ozone Park
Tottenville, Great Kills, Annadale
Upper West Side, West Side
Jamaica, Hollis, St. Albans
Wakefield, Williamsbridge, Woodlawn
Queens Village, Cambria Heights, Rosedale
Castle Hill, Clason Point, Parkchester
East Flatbush, Farragut, Rugby
Co-op City, Pelham Bay, Schuylerville
But there are some bright spots for young buyers. In the five-year period ending in 2018, the last year census data were available, 17 percent of homeowners were millennials in the neighborhoods of Greenpoint and Williamsburg in Brooklyn, the highest rate in the city. Others included Murray Hill in Manhattan (16 percent), Bushwick in Brooklyn (15 percent) and the Concourse section of the Bronx (14 percent). Neighborhoods with the lowest share of millennial homeowners included Ozone Park in Queens (7 percent), Tottenville on Staten Island (6 percent) and Co-op City in the Bronx (5 percent).
The challenges often go beyond asking price. Co-ops are generally less expensive than condos, but may require deeper cash reserves after closing. So even borrowers who qualify for bank loans or have sufficient cash could easily fail to meet a co-op building’s stricter financial guidelines.
Here are some ways young home buyers are making it work.
Express to the Bronx
Shameek Bose, 37, had been paying $2,000 a month to rent a fourth-floor walk-up studio on the Upper West Side, where he had lived for almost a decade, and was tired of throwing money away.
So last year, he bought a studio in a co-op with a doorman, elevators and parking for $200,000 in the Concourse section of the Bronx. His mortgage and maintenance, including utilities, is about $600 less than his Manhattan rent. He said he found a welcoming and diverse L.G.B.T.Q. community in the neighborhood, and with a nearby express train, his commute to Midtown is only about 15 minutes.
“My quality of life has significantly improved,” said Mr. Bose, who focused his search in the South Bronx, where prices were a fraction of what he saw in Manhattan, and co-op boards were more lenient. While co-ops in Manhattan often ask for 20 percent down, and sometimes significantly more, his building required just 10 percent. Mr. Bose, who works for the World Economic Forum, said he has six-figure student debt, but the board was accommodating, because he was on a steady repayment plan.
After being outbid on another apartment in the same building, he decided to offer 20 percent down — $40,000 cash — to convince the seller he was a low-risk buyer. He could not rely on family to help bridge the cost, but he had for years contributed the maximum amount to his 401(k) account, on the advice of a mentor. He borrowed about $20,000 from his retirement fund, and covered the other half of the down payment with savings.
Mr. Bose picked up other money-saving tips by attending home counseling sessions with Chhaya, a housing advocacy group in Queens. For instance, he qualified through his lender, HSBC, for a $7,000 first-time buyer grant that helped cover his closing costs. Several other large banks have similar programs for first-time buyers. And he also negotiated a $5,600 credit from the seller, because the closing was significantly delayed.
Owning a home has also become a point of pride for Mr. Bose, who immigrated to New York as a child from India. “It wasn’t something that was allowed for people without generational wealth,” he said. “I didn’t want to accept that.”
Low Prices, High Bars
Yet some of the best deals on the market are off-limits to many young buyers, because of prohibitive financial standards.
“You still have this Catch-22,” said Nikki Sun, an agent with Compass, referring to falling prices, but co-op boards rejecting buyers with less-than-sterling credit or inadequate cash reserves, for fear of that buyer hurting the building’s resale value. “The seller may be desperate, but not the building.”
This can be very apparent in Housing Development Fund Corporation co-ops, a category of buildings where units are reserved for buyers who earn below a certain income, but cash requirements can be onerous.
Weiguang Zeng, 34, and his wife, Rita Wu, 33, wanted to buy a two-bedroom last year that was listed for $460,000 in Harlem, where similar apartments could cost twice as much. But the unit was in an H.D.F.C. building that required the buyers to earn a combined income of less than $112,000 a year. They qualified because Mr. Zeng, who worked in the metal industry in China, is unemployed while awaiting his work visa; Ms. Wu is a teacher at a private school on the Upper West Side.
But at their income level, they could only borrow $150,000, and fell short of the building’s requirement to have enough savings to be able to pay two years of mortgage and maintenance after closing.
“Unless the parents can chip in, it’s just impossible for many people,” said Ms. Sun, who represented the couple.
The seller was motivated, however, and the couple was able to negotiate the price to $400,000, a 13 percent price cut. With the help of contributions from family and savings, they agreed to buy the apartment all-cash. They moved in with their son, William, in April.
“We almost just wanted to give up,” said Mr. Zeng, after a lengthy back-and-forth with the board. “We feel very lucky.”
There are about 24,400 H.D.F.C. units across 1,010 co-ops, more than half of which are in Manhattan, according to Matthew Creegan, a spokesman for the Department of Housing Preservation and Development. But only a small fraction are currently available for sale.
Condo Deals in a Down Market
Condos are typically more expensive than co-ops, but many developers are offering incentives amid softening demand that could change the calculus for some young buyers.
At 111 Montgomery in Crown Heights, Brooklyn, a nearly finished 163-unit condo complex close to Prospect Park with studios to three-bedroom apartments, prices for studios start at $499,000 and two-beds range from $899,000 to $1.5 million. There are certainly less expensive co-ops available, but in November the developer, CIM Group, sweetened the pot: buyers could put down as little as 5 percent cash.
“We’re now in a market where developers are willing to play ball,” said Christine Blackburn, an associate broker with Compass and the head of sales for the building. When the project began marketing in early 2019, they required 10 percent down. Recently, the developer also offered to cover a year of buyers’ common charges. That amounts to roughly $5,200 for a studio.
“The majority of the market will give you transfer taxes without even blinking,” said Kobi Lahav, the senior managing director at Living New York, a brokerage, referring to a popular concession that could amount to about 1.8 percent of the sale price. And developers often offer more sweeteners on the back end, including closing cost credits, depending on their rate of sales.
Ms. Blackburn would not discuss sales figures, but said that more than half of signed contracts in the building are with first-time buyers, many of them millennials.
Knowing Where to Look
For Ms. Morton, the 29-year-old police officer, her opportunity came through an affordable housing lottery in the Nehemiah Spring Creek development in East New York, where one- and two-family homes were reserved for buyers making between about $50,000 and $154,000 a year.
Ms. Morton also qualified for the city’s HomeFirst program, which offers up to $40,000 in down payment or closing cost assistance, provided the owner earns less than 80 percent of the area median income ($59,760 for a single buyer), and agrees to live in the home for at least 10 years, with some exceptions.
She still needed to show adequate savings to complete the purchase, and in that regard, she had help: Until she moved into the new home in September, she had been living with her grandparents in the same neighborhood.
“I didn’t need to pay those bills,” she said about the money she saved on rent, and it allowed her to save roughly $14,000 for a down payment.
High rent remains one of the biggest obstacles to adequate savings for young buyers: 28 percent of New Yorkers were severely rent burdened in 2018, meaning they spend more than half of their income on housing, according to the New York University Furman Center.
Anita Douglas, 43, while not technically a millennial, is part of a wave of New Yorkers making their first purchase later in life.
‘‘I realized my only hope was to get a home through the lottery process,” said Ms. Douglas, a procurement director for the city who recently made around $90,000 a year. She has about $300,000 of student debt. Last year she was selected to buy a 1,280-square-foot house in Jamaica, Queens for $456,000 for her and her five children.
Ms. Douglas used HomeFirst and a version of the New York State program called SONYMA (pronounced sunny-may) to help cover her down payment.
SONYMA, which stands for State of New York Mortgage Agency, provides low-interest mortgages with low down payment requirements, as well as down payment assistance for qualifying low- and middle-income buyers and veterans. The program, which is primarily for first-time buyers, can be combined with other grants. Down payment assistance of up to $15,000 is forgivable if the homeowner remains in the home for 10 years; those who sell or refinance earlier pay back a prorated sum, depending on the length of residency.
Though the program was created in 1970, it remains largely unknown to most buyers. From 2011 to 2019, SONYMA provided 2,689 loans in New York City, with the most loans issued in Brooklyn, with 912, according to a spokesman. Last year, just 173 loans were issued in the five boroughs.
Ms. Douglas, who previously rented a two-bedroom apartment in Bedford-Stuyvesant, Brooklyn said the home search, up until the moment she qualified for this home, was extremely discouraging. “Everything in my price range was awful,” she said, recounting a subdivided house in the Bronx where she would have had to convert an extra kitchen into a bedroom. She applied for six different housing lotteries before being selected for this renovated house, which was part of the city housing authority’s Small Homes Rehab-NYCHA program.
Now she and her five children, ages 9 to 19, have a three-bedroom, one-and-a-half bath spread, with a yard and an empty driveway — it was either a new car or the down payment, she said. The choice was obvious.