The dream of homeownership is becoming harder and harder to achieve for many people. According to a recent real estate report compiled by Homelight, agents are starting to see that many first-time home buyers are either pausing their home search or giving up entirely. The report also reveals that this segment of homebuyers is making this decision based on the increasing costs of homes and the higher interest rates. But there is another trend that is emerging for such distressed home buyers. Instead of qualifying for homes alone, some potential buyers are teaming up with friends and family, finding a real estate agent, and making the American dream work through co-buying a home. Keep reading to learn more about this emerging trend.
What is Co-Buying?
If you find yourself in a similar predicament and having a hard time purchasing a home in this current market, co-buying or getting a small home like a DADU may be a great option. But what exactly is co-buying? Traditionally, most home purchases have been completed by people who are spouses. However, for nearly a decade, the emerging trend has been for homeowners who aren’t married couples to purchase a home together. The pandemic and recent interest rate hikes have continued to spawn this trend as middle-class homebuyers are finding it more challenging to buy a home on their own. As a result, friends, partners, and multi-generational family members pool their money and credit together to qualify for a home they can share. They are finding this to be a much more affordable solution than renting which has soared to between 11.3 and 40 percent in some regions of the U.S.
Why Is Co-Buying Trending?
According to a recent article by U.S News, people purchasing homes with different last names soared 771 percent between 2014 and 2021. Some believe this trend is because housing is becoming less affordable, especially for millennials. Additionally, many homeowners aren’t getting married as young or at all as the previous generations. On top of this, many new home buyers carry much more student loan debt than previous generations. With no other solutions on the horizon, friends and families decide that the best option for attaining the American dream of homeownership is to purchase a home together. Either they are buying existing homes or qualifying for newly built homes.
Tips on Co-Buying
Although many potential homebuyers are waiting to see where the market goes over the next year, you may want to consider co-buying. Here are some valuable tips to consider if you wish to purchase a home with friends, family, co-workers, or a life partner.
Ensure that everyone wants this long-term
Decide who the principal applicant and the co-applicant are when applying for a loan
Get a real estate attorney involved
Try to get a home with people who are financially responsible
Determine how things will be handled if someone dies
Figure out how to handle a roommate who refuses to pay or can’t pay bills due to job loss
Determine how much everyone is responsible for in terms of the mortgage, insurance, bills, etc.
Takeaways
Co-buying isn’t much different than renting with roommates. The advantage is that you and your co-habitants can build equity in the home that you purchase. The equity can be split upon the sale of the house to help each other get a start on homeownership. This could be an advantageous way to navigate the present roadblocks to ownership until the current market rebounds for buyers.