Why can’t Colorado millennials afford to buy a house?
Standing inside a bucket he purchased last fall, Alex Eherenman bathed in his work bathroom. Water pooled at his feet as he splashed himself from the sink faucet, but at least he wasn’t leaving behind a puddle.
“That was a pretty low point for me,” Eherenman said, recalling the scene recently.
Eherenman, 35, doesn’t have running water in the truckbed camper he calls home along with his pup Nina. The duo curl up together somewhere new under the stars in western Colorado’s Roaring Fork Valley each night.
Eherenman’s new job as a bike manufacturer at least offers a shower he can use, but the inconveniences of camper living are beginning to weigh on him. He stashes what food he can fit in a cooler as a makeshift refrigerator. His beloved musical instruments live in a storage unit out of reach. To avoid raising the ire of local authorities, Eherenman is often on the move, searching for a new spot to park and get some sleep.
Most days, the concept of homeownership seems like a cruel joke to Eherenman rather than a feasible goal.
“I definitely didn’t envision this as my living situation as a younger person,” Eherenman said. “It was a little more fun when I was younger, but now that I’m in my mid-30s, it’s kind of a drag. It would be great to own a house someday, but to be perfectly honest, it feels completely unattainable.”
Eherenman is a millennial, that oft-maligned generation encompassing people who are now in their mid-20s to around 40 years old.
Researchers — and occasionally frustrated parents — note that millennials, some of whom are now creeping toward middle-age, are reaching milestones like marriage, parenthood and homeownership later in life than previous generations.
At pivotal moments in many millennials’ lives — high school graduation, college degree attainment, workforce entry — outside forces including the 2008 recession and its fallout, the student debt crisis and now the COVID-19 pandemic have stymied progress, stalling or altering the usual rites of passage of American adulthood, experts told The Denver Post.
One repercussion: Millennials are less likely than previous generations to own their own homes.
In 1982, 41% of households headed by people younger than 35 — the approximate age of baby boomers at the time — owned their own home, according to Pew Research. In 1999, 40% of Generation X-headed households in this age bracket owned homes. And in 2016, that number for that same age group dropped to 35%.
The rate at which millennials can purchase a home in Denver given the city’s wages is among the lowest in the country, a study from the National Association of Realtors found.
The reasons why millennials aren’t purchasing homes at the same rate as their parents are nuanced. However, soaring education costs and student debt burdens, rising health care prices and an explosive housing market that’s outpacing wages and inflation are contributing factors, according to researchers and economists.
“I’m hugely sympathetic to the situation millennials are in,” said Jialu Streeter, a research scholar at the Stanford Center on Longevity, who worked on a study about millennials’ delayed life milestones. “It’s not this misconception that the generation is lazy.”
Saddled with student debt
By the time Sheena Kadi finished graduate school, where she earned her MBA in sustainable business development focused on triple bottom line economics, the now-38-year-old amassed just under $125,000 in student loan debt.
Kadi, the first in her family to attend college, said she didn’t fully understand the implications as a teen when she signed up for the loans.
“My parents weren’t able to help me pay for college, and it was so easy to accept these loans,” said Kadi, who also received federal Pell grants. “I had it drilled into me by parents, family, teachers — basically every adult in my life — that if I wanted to succeed, I had to go to college.”
About 75% of all jobs in Colorado and 97% of what the state considers top jobs — occupations with high growth rates that pay a living wage — require education and training beyond high school, according to a 2019 report issued by the state higher education department.
Kadi, who works at anti-hunger nonprofit Metro Caring and does political consulting on the side, pays $1,700 a month in rent for an 800-square-foot studio apartment in Denver’s Five Points neighborhood. The millennial said she’s been working since the day she turned 15. A cancer diagnosis she overcame years ago and a divorce put Kadi further in debt, she said.
Kadi’s student loan payments are paused because of the pandemic, but in September, she’ll be expected to shell out more than $500 a month again — a burden she said significantly hinders her ability to save for a home.
“I would love to own my own home,” Kadi said. “I know the pride my parents, grandparents, aunts and uncles have in homeownership. When you look at building wealth in this country, a lot of it is tied to homeownership. Unfortunately, I don’t think I’ll ever be able to afford it in Colorado.”
Millennials are better educated than previous generations, but they also have tuition costs and student debt unlike anything experienced by their predecessors.
The share of young adult households with any student debt doubled from 1998 to 2016, according to Pew Research. The median amount of student debt also was almost 50% greater for millennials, at $19,000, than for their Gen X counterparts, who held around $12,800 of loan debt when they were younger, according to Pew Research.
In 1980, annual tuition for an in-state student attending a four-year public Colorado institution was, on average, about $790 before adjusting for inflation, according to data from the federal Integrated Postsecondary Education Data System. In 2000, that number rose to about $2,890. In 2020, that number was more than $10,400.
To pay for that education, about 750,000 Coloradans are saddled with nearly $28 billion in student loan debt, according to the state attorney general’s office. More than 100,000 Coloradans with student debt are in default, not making their loan payments.
In 2001, the average student loan debt for a bachelor’s degree in Colorado was $15,769, according to data from the state higher education department. In 2020, students in the state walked out of college carrying an average debt of $26,289, the agency said.
“Having these student loans is actually contributing to a delay of homeownership and not saving for retirement for millennials,” Streeter said. “You don’t even realize the time bomb that will be down the road. Past data has shown people who buy homes experience wealth growth in the long run.”
Young adults don’t generally have much accumulated wealth, Pew Research found, but millennials have less wealth than baby boomers did at the same age. The median net worth of millennial households was about $12,500 in 2016, compared to $20,700 for boomer households the same age in 1983, Pew found.
Housing market “absolutely on fire”
Wealth-building is one reason why Michael Ramirez, a 33-year-old political consultant who rents in Northglenn with his fiancé, is so eager to buy a home.
Instead, Ramirez will be moving back into his parents’ home in Frederick for the next six months in the hopes of saving for a down payment.
“I have always wanted to be a homeowner, but it never really felt attainable,” said Ramirez, whose parents immigrated from Mexico and purchased a home in 1998. “Saving up money for a down payment didn’t seem feasible with my over $50,000 in student loans. As we’ve started looking into buying a home, I’m also afraid if we make a bid on a house we like, we will get outbid by a cash offer because we don’t have the luxury of just being able to offer cash.”
Jeff Engelstad, a real estate professor at the University of Denver who has been in the business since 1980, described the Denver housing market as “absolutely on fire.”
“Properties go on the market and they’re sold immediately,” Engelstad said. “Properties go on the market for $500,000 and they bring in $600,000. Young millennial buyers that don’t have all cash have to arrange their financing ahead of time so they have all cash so there are no contingencies in order to win a bid. People talk about how they were able to beat out seven other offers and be the one who was willing to overpay the most, and now that’s a badge of how cool they are.”
A 2020 year-end report from the Denver Metro Association of Realtors found that Mile High home prices have skyrocketed over the decades and that homeownership is the primary driver of personal wealth.
The average Denver metro closing home price in 2020 was $525,185 — up 7.9% from 2019, marking the ninth consecutive year of price growth, the report said. Over the last 31 years, the report said the average home price has increased “a staggering 457%.”
Meanwhile, Colorado wages increased 66% in the past couple decades, according to data from the Colorado Department of Labor and Employment. In 2000, the average weekly wage in Colorado was $715, according to state data. In 2019, that number had risen to $1,189, or $1,140 when adjusted for inflation.
Ramirez, who was a first-generation college student, said he didn’t have access to the same knowledge about home-buying and finances that his peers did.
Millennials are more racially and ethnically diverse than their previous generations, Pew Research said.
“Millennials are less likely to be white than previous generations and, historically, we have made it very difficult for those who are not white to build wealth through homeownership,” said Gray Kimbrough, an economist at American University who has studied the plight of millennials.
Ramirez said a lack of financial literacy contributed to his slower start to homeownership.
“I didn’t understand interest until maybe five or six years ago,” Ramirez said. “I didn’t understand the importance of credit and what makes it go up and down. I didn’t know about any of the programs that help people buy homes. Some of my peers did have this information, and I see how they’ve been able to take advantage of those programs and buy homes and build equity. That’s something I wish I had known sooner to start this journey.”
Eherenman, who is hoping to save enough money to rent an apartment in the Roaring Fork Valley before winter temperatures creep into his camper, said most any homebuyer his age who he knows had financial assistance from their parents.
“It’s just a really stark sort of picture of the wealth gap that exists in this country,” Eherenman said. “I think about my time in college, too. There’s such a huge gap between people whose parents were able to pay for their college and those of us who weren’t and who are in tens of thousands of dollars of debt. It’s the difference between starting at zero and starting at minus $50,000.”
A decade without a doctor visit
Eherenman, who graduated college with a degree in audio engineering in 2009, is nursing about $40,000 in student loans.
He’s worked a string of jobs over the years including in the outdoors industry, the music industry, retail and elementary school teaching, all while moving in and out out of his mom’s house post-college to save money.
“I graduated just in time for the financial crisis,” Eherenman said. “Like many other millennials, I have been hit by all these global crises at really key times in my life when I’m trying to go out in the world and establish myself.”
Drawn by the allure of free health care, Eherenman decided to move to Canada right before the pandemic.
“It looked like an opportunity to have a normal, stable existence,” Eherenman said.
Right before the coronavirus shut down the Canadian border to the United States, Eherenman packed up and moved home. Back in his mom’s house again, homeownership seemed like a distant dream quashed by other pressing financial burdens.
“I haven’t been to the doctor in probably 10 years or more or been to the dentist in at least five years or more,” said Eherenman, who is on Medicaid. “The reason is I can’t afford to go in when I’m kind of sick and have them prescribe me ibuprofen and I end up paying $100 to $300.”
From 2010 to 2019, health insurance premiums rose more than 40% for a single insurance plan through an employer, according to the 2019 state health insurance cost report. For a family, the report found premiums increased more than 50% in the same time frame.
Health care costs in Colorado have shot up more drastically than elsewhere in the nation, according to a report released last year by the Colorado Department of Health Care Policy and Financing. The increases were driven largely by rising hospital prices, the report said, noting that Colorado hospitals charge some of the highest prices in the nation.
In 2009, the report said Colorado hospitals’ operating expenses were 3.2% higher than the national average. By 2018, the same expenses were 14% higher.
Eherenman hopes camper living will allow him to sock away money for an apartment security deposit in time to beat the rush of winter seasonal workers who are often priced out of mountain town housing, too.
The 35-year-old recoiled upon learning the cheapest studio apartment for rent in the new apartment building leasing in downtown Carbondale was going for $2,250 a month.
“It’s an unfortunate choice I’ve had to make,” Eherenman said. “Either I’m paying an exorbitant amount of rent or I’m mostly homeless and saving a little bit of money.”
Kimbrough acknowledged that older generations complaining about those who came after them is nothing new. But he noted there is a good deal of economic proof to help explain the difficult financial situations entangling millennials.
“There’s a lot of evidence that young adults are doing their best, getting more education than previous generations, holding jobs and paying a lot more for things that were cheaper for previous generations,” Kimbrough said. “I don’t think they’re worthy of any special complaints about their work ethic or other things people raise.”