In Response to "Millennials Want to Buy Homes but Aren’t Saving for Down Payments" by The Wall Street Journal

I acknowledge it is not common to write an article in response to an article, but upon reading this, I had more to say than a comment or an update, so this is me working with the tools I'm given. Having discussed the topic of home-ownership with so many of my friends, family and (obviously) colleagues lately, this is an issue I see play out every single day. If you're curious, here are my thoughts on declining "savings rates"*** and how they relate to home-ownership. 

For reference, here is the original article: Millennials Want to Buy Homes but Aren’t Saving for Down Payments. You should probably read that first.

Enough About Millennials Already?

First off, I, and many others, have grown increasingly frustrated with the term "Millennial". While this article differentiates "old millennials" (thanks, by the way) to a certain extent, it still grates on me. OF COURSE people who are 24 years old and those who are 34 years old are in different financial positions. For the record, I'm both 34 years old and an "old millennial". If I'm honest, I don't love being called one at all. Many of my comparable vintage associates feel the exact same way, and see little resemblance between themselves and those even 7 or so years behind.

It's really hard to compare the two groups at all, even though they are part of the same generation. Perhaps our definitions and even usage of "generations" to classify people have become archaic? It seems to me that the rate of change our world undergoes has accelerated. Our stereotypes are not keeping up.

Strive for 25

My business partner and I have been discussing starting a not-for-profit outreach program we want to call "Strive for 25". I have registered the URL, although nothing is up yet. This was entirely Joel Farrell's idea but I'm buying in 100%, and this article strengthens that resolve. There you go partner, I've made it public, so now we have to do it! 

The idea will be to target very young working citizens (18-24 y.o.) and teach them how to automate their savings, setting aside 25% of their income on autopilot by the age of 25, hence "Strive for 25".  In order to do this, these "millennials" (ugh, I said it) will have to first believe that it can be done, learn where and where NOT to cut expenses, purchase wisely, find suitable investment or savings vehicles, gain valuable education and experience about financial products, and as I am about to discuss further down, balance any debt they have outstanding. It's time to have a well-rounded and all-encompassing option with some built in accountability, don't you think?

More to come on this, and if you would like to be involved, please shoot me a message.

Down Payments for a Responsible Mortgage

This Wall Street Journal article references saving 10% for a down payment, and truly, to make a responsible home purchase that is not necessary in many cases. There is no "one size fits all" down payment requirement. If you're a Veteran, you can often put no money down at all, and work with an agent and a lender that can get all of your closing costs covered. If you're in a high cost area like most of California, D.C,, Maryland, New York etc, then FHA makes it possible for you to get in at 3.5% down somewhat safely most of the time. Granted, whether these are the right choices depends on your exact and unique situation. What do I mean by that? Well, at a minimum we need to consider: the area you're buying into, your credit, your financial situation, where the rate market is likely headed, and most importantly but most oft ignored -- YOUR FUTURE PLANS. The details matter, but unless you find a mortgage loan officer that's comfortable, confident and cares enough about you to dive deep, you will likely get canned and maybe even costly advice. Like most things in life, the goal is to balance risk versus reward appropriately. What are the risks? Negative or low equity, higher payments compared to your income, and wasting or losing money, to name a few. The rewards? Having a home to call your own now vs. later, a potentially great investment, saving money over time, and saving cash for other opportunities.

***"Saving Rates"

Ok, so the quotes are because I'm talking about two different types of "saving rates"--and when I say declining saving rates, don't you think the actual interest "rate" people earn on their savings has something to do with the "rate" at which they save? It's hard to get excited over (almost literally) 0.0% interest savings accounts. Here's a free Master's thesis for you: The utility of a true savings account will vary, then, with overall market conditions and the broader economy.

For example, and I tell this story often, I graduated with $120,000 in student loan debt after Santa Clara University and then getting my MBA. I can tell you, there were many months where I received a bonus and thought, "how can I put this in savings at 0.25% when I am paying 6.25% on these loans?!?".  Now I know better, but without some very in depth and expert education on the subject, how will most young professionals figure out the right way to balance the absolutely pervasive issue of student loan debt (which this article ignored, by the way) vs. savings? We hope to help with Strive for 25, but it will take much, much, much more conversation than we can provide to make a dent (think Tipping Point). Feel free to share this article and add your own commentary, like I did here. Keep the conversation going.

"Rising tides lifts all ships!" ~ Mike Swaleh paraphrasing JFK who also heard this from someone else.