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Generation RENT Marta Dinsmore, Realtor Intero Real Estate Services 408.840.7420 DRE #01352339 Sean Dinsmore, Realtor Intero Real Estate Services 408.840.7327 DRE #01966405 14 T he lack of inventory has made it more difficult to buy a home. That’s due in part to people being less likely to sell as a result of low equity. However, the bigger issue is production, which is falling short of housing needs. The California Association of Realtors CEO, Joel Singer, said that the construction industry’s recovery has been slow and has missed building 165,000 new units per year in the state. Make no mistake about it — Californians do want to own single-family homes. Real estate continues to be considered a top investment, with a 2015 Gallup poll finding that most Americans consider real estate to be a better investment than stocks, gold or savings accounts. Millennials (ages 16 and 39) with jobs began saving earlier than Gen X (ages 40 and 51) and Boomers (ages 52 and 70); they too seek to purchase homes in the suburbs, according to New Geography, a publication focused on demographic research and analysis in California. However, there is a concern that Gen Y, who are between the ages of 25 and 35 and presently make-up the largest share of first-time buyers, aren’t flocking to buy homes despite near record-low interest rates. A mere 37.9 percent of Generation Rent have purchased homes, according to 2012 data from consumer research company CoreLogic. Compared to the same age bracket in 1980, where nearly 52 per- cent were buying homes, Gen Y is off to a dif- ficult start despite wanting to be home owners. “By 2025, California will have a middle class of renters,” said Dr. John Husing, an economist and vice president of Economics & Politics, Inc., while Singer stressed the organization’s concern over the increase in renting throughout California due to low housing inventory and unaffordable housing. Countless articles have been written about how Millennials are delaying milestone life events, including getting married, having chil- dren and buying a home. A 2014 report from Demand Institute, a non-partisan and non- profit think tank, fell in line with other Gen Y surveys, finding that Generation Rent doesn’t want to rent or live with their parents at all. In fact, they’ve nearly been priced out of the market, survey results showed. Furthermore, nowhere else besides Hawaii and California are median housing costs so high, according to the National Association Of Realtors®. The concern is a trend of middle-class Americans, GILROY • MORGAN HILL • SAN MARTIN JANUARY/FEBRUARY 2016 including would-be buyers in the Gen Y bracket, being unable to afford housing. Furthermore, the impact of the last recession (2007- 2009) was tremendous on Gen Y. A Pew Research survey from 2014 found that the recession, along with the longer-term effects of globalization and rapid technological change of the American workforce, are responsible in part for Gen Y’s slow start to forming their own house- holds. Consider, that household income in the U.S. today remains below its 1999 peak. That makes it the longest period of wage stagnation in modern times. For Millennials who were just entering the workforce in 2007, these macro-economic trends were devastating. A January report from the U.S. Census Bureau shows that Millennials today are earning $2,000 less than their parents did when they were the same age. Perhaps the most startling item in the Census report is the fact that adults are more likely to have a college degree, but also more likely to live in poverty, due in part to the high cost of living. Buying a home may not be the wish of every middle class Californian, however, with the difficulty of buying a home, more people are renting than ever before. This boom has created an industry behemoth–a grossly expensive renter market. Data from the U.S. Department of Housing and Urban Development indicates that California’s average 2015 fair market rent is between 24 percent and 34 percent more than the national average, depending on the unit type. One recent study from the California Housing Partnership suggests that the state’s lowest-income households are spending two- thirds of their income on renting properties, leaving them with little money for other basic necessities, including food, healthcare and transportation. While buying is not always the best solution, California residents could save 32 percent per month by buying a property in many urban and suburban areas, according to C.A.R. data. The state’s housing situation is solvable. The non-partisan Legislative Analyst’s Office called on California to build “as many as 100,000 additional units annually… to seriously mitigate its problems with housing affordability.” This would mean doubling the housing supply annually. California has long been seen as the land of opportunity — and with that comes the ability to own one’s home. C.A.R. analysts, as well as the state’s LAO, have pointed to long-term solu- tions that could help mitigate the state’s low housing supply — thereby putting California back on the map for reluctant renters looking to grab a piece of the homeownership dream.