Rob Sanders, a senior vice president with TTR Sotheby’s International Realty in Washington, said that while millennial luxury buyers occasionally have a trust fund or other help from their parents, most of the ones he works with are using their own money.
“They’re quick to point out that they are a lobbyist or a venture capitalist or have been working as a lawyer for seven years even though they are young,” he said. “They’ve made their money on their own and are proud of it.”
Down payment challenges
A common challenge for even high-income earners is coming up with the cash for a down payment. Even a low 5 percent down payment on a $1 million purchase is $50,000, and a 20 percent down payment would be $200,000.
“The down payment issue causes some highly paid younger people to back away from a luxury home because if they only have the cash for a smaller down payment, then their monthly housing payment will be big,” said John Coplen, a real estate agent with Evers & Co. Real Estate in Washington.
However, Coplen said, many luxury millennial buyers have help from their parents or grandparents for the down payment or save the cash they receive as wedding gifts. One young attorney received a small inheritance that supplemented the money she saved for her home purchase.
Some parents view providing their children with the money for a home purchase as a transfer of wealth rather than a gift, said Leonard Steinberg, the New York-based president of Compass real estate brokerage.
He said they look at it as a chance to teach their children about the responsibility of homeownership and recognize that the money is something their kids would have received anyway as a future inheritance.
“Some high-earning millennials save money until they are in their early 30s to buy a place and just skip over that starter-home phase,” Judy said. “They’ll stay in an apartment until they can afford to pay for the place they want.”
Coplen worked with a couple who bought and renovated a condo in LeDroit Park when they were in their 20s and leveraged the profit from the sale to buy what will be a $1 million house in the H Street corridor once they finish renovating it.
“These are very savvy guys, one of whom is a lawyer, and they spent $100,000 on their first renovation project,” Coplen said. “It’s a very large condo, and they sold it in one day for $850,000. They were able to ride the wave of rising prices there and hope to do it again, but they also wanted to be in a house with a yard instead of a condo.”
Sanders and his business partner, Brent Jackson, an associate broker with TTR Sotheby’s, worked with a young couple, both attorneys, who purchased a home in the Navy Yard neighborhood four years ago for $785,000, which increased $250,000 in value.
“The sale of that property gave them a big down payment for their next place, plus their combined income is over $1.2 million,” Sanders said.
Judy said some of his millennial buyers are people relocating to D.C. from San Francisco or New York who have sold a property or are accustomed to paying astronomical rent, so purchasing a $1 million home can seem like a bargain to them.