Trendspotting: Are Millennials Co-Buying Homes Together?

NewsWire: 11/30/21

• Millennials are (reportedly) teaming up their friends and roommates to buy houses. Faced with soaring home prices, many are looking beyond their families for financing as they seek more space. (The Wall Street Journal)
• NH: It’s no secret the housing market is red hot. That can pose obstacles to young adults looking to buy a home. But according to the WSJ, some Millennials are overcoming soaring prices by co-buying houses with friends. 
• How does this work? There are two main ways to co-buy a home.
• Joint-Tenancy Agreement: This is (in most states) the standard form for married couples, and it's often chosen by unmarried partners. A party can’t sell their portion unless all co-signers agree, and if a party dies, their claim is split among the remaining owners--typically, the surviving spouse. Needless to say, joint-tenancy truly locks you in.
• Tenancy-In-Common Agreement: When friends do opt to buy together, this is the legal route they usually take. A party can sell their share without consent from the other co-signers, and if a party dies, their claim goes to their estate. While parties can own different percentages of the property, no one owns a specific portion. 
• Most of this WSJ article is based on anecdotal evidence. However, it does offer some data. According to the National Association of Realtors, from April to June 2020, 11% of homebuyers were unmarried couples, and 3% were classified as “other.” That’s up from 9% and 2% a year earlier, respectively. Additionally, Attom Data Solutions, an analytics firm, found that the number of co-buyers with different last names increased +771% between 2014 and 2021. 
• IMO, these data don't support what the article is claiming. Unmarried partners who buy a home together aren't just "friends." They are committed for the long haul and could easily get married. As for the increase in “others” and co-buyers with different last names, I suspect this is largely happening within multigenerational families. We have previously covered extended families pooling their money to purchase otherwise unaffordable properties. (See “The Family That Buys Together.”) 
• As for friends, the very nature of co-living--outside of a long-term commitment to another person--makes a poor fit for any type of joint ownership. Sure, you are free to sell your share. But what sort of market is there for the right to move into a particular home with other particular people whom no one else knows. And if it's not you but the other person who decides to sell, you could be stuck co-owning with a complete stranger.
• Oh, and let's not forget the serious financial risks. In both types of agreements, joint-and-several liability applies, which means that all parties are liable for paying all the bills, including the mortgage, utilities, and property taxes. So if your co-signer loses their job and can't pay, you're on the hook to make all the payments yourself. Remember, Millennials are a risk-averse generation when it comes to money. Any form of homeownership makes them nervous. Even when they get married, they find ways to hedge their bets. (See "Millennials Turn to Prenups.") It's hard to believe they would blithely assume such glaring risks.
• Perhaps there are circumstances where it could work. Wealthy individuals could co-buy a vacation home. And like a timeshare, they could specify when people can use the property. Co-owning could also make sense for retired or older single Xers or Boomers who want to start an intentional community. Their friendships are more steady, and they may not have any other competing family loyalties.
• But hordes of young adults opting to co-own? Sorry, WSJ, I just don't buy it.