Why most San Diego millennials can't afford to buy homes

Young people in San Diego are struggling to purchase homes without major budget changes or help from family.

Why it matters: Nearly three-quarters of aspiring homebuyers say affordability is the No. 1 obstacle to owning a house, per a Bankrate study.

• The biggest obstacles among millennials who don't already own a home are income, down payment and closing costs, along with high home prices.

Driving the news: A recent Redfin report on "nepo-homebuyers" found 38% of recent buyers under age 30 nationally received family money to afford their down payment.

What they're saying: Locally, there's been an increase in wealth transfer between generations, particularly from boomers, according to Julie Chang, a local agent with Pacific Sotheby's International Realty.

• She's seen an increase in gift money during escrow in the last few years as parents and grandparents move to dole out their inheritances.
• "If you don't have generational wealth, then you're competing against people with generational wealth," Chang told Axios.

Zoom in: Millennial mortgage applications were down 5% in the San Diego metro area for the first half of 2023, compared to the same time last year, according to figures LendingTree shared with Axios.

• The share of mortgage purchase requests from millennials dropped to about 54%, outpacing the national trend.

Zoom out: In the first half of 2022, nearly 52% of LendingTree's mortgage requests across the U.S. came from millennials. In the first half of 2023, it dropped to roughly 50%.

• Yes, but: Millennials still make up a large share of first-time buyers.

What's happening: Mortgage rates have pushed many folks, especially young buyers, out of the market.

• Saving for a home in San Diego can take nearly two decades, as record high prices, elevated interest rates and low inventory make buying a first home difficult.

• Some Gen Zers are moving in with their parents because homeownership feels unattainable.

Reality check: In an expensive city, it's not a given that you'll own your first home before your mid-30s, Chang said.

• It's expensive, takes time and most of the people who have excess cash either owned somewhere else and sold, have intergenerational wealth or dual-incomes with no kids, she noted.

Be smart: Waiting to buy isn't a bad thing. "You can build wealth just fine by renting," says Bankrate chief financial analyst Greg McBride.

• Taking time to save, invest, build your credit and advance in your career can meaningfully improve your financial picture, he says.
• Homeownership "sucks the cash right out of you," at least at first, McBride says. You need to save beyond the initial down payment to weather unexpected additional expenses — the primary reason millennial homeowners have buyers' remorse.