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Are Millennials Really Co-Buying Homes Together?  - AdobeStock 191061555

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. 

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Neil Howe is a renowned authority on generations and social change in America. An acclaimed bestselling author and speaker, he is the nation's leading thinker on today's generations—who they are, what motivates them, and how they will shape America's future.

A historian, economist, and demographer, Howe is also a recognized authority on global aging, long-term fiscal policy, and migration. He is a senior associate to the Center for Strategic and International Studies (CSIS) in Washington, D.C., where he helps direct the CSIS Global Aging Initiative.

Howe has written over a dozen books on generations, demographic change, and fiscal policy, many of them with William Strauss. Howe and Strauss' first book, Generations is a history of America told as a sequence of generational biographies. Vice President Al Gore called it "the most stimulating book on American history that I have ever read" and sent a copy to every member of Congress. Newt Gingrich called it "an intellectual tour de force." Of their book, The Fourth Turning, The Boston Globe wrote, "If Howe and Strauss are right, they will take their place among the great American prophets."

Howe and Strauss originally coined the term "Millennial Generation" in 1991, and wrote the pioneering book on this generation, Millennials Rising. His work has been featured frequently in the media, including USA Today, CNN, the New York Times, and CBS' 60 Minutes.

Previously, with Peter G. Peterson, Howe co-authored On Borrowed Time, a pioneering call for budgetary reform and The Graying of the Great Powers with Richard Jackson.

Howe received his B.A. at U.C. Berkeley and later earned graduate degrees in economics and history from Yale University.