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First-time buyers waiting longer to become homeowners

| Saturday, Jan. 9, 2016, 9:00 p.m.
Justin Merriman | Trib Total Media
Travis & Meagan Brannon look over a home in Rosslyn Farms with John Shutey, a realtor with Berkshire Hathaway, right, on Tuesday, Dec. 29, 2015.
Justin Merriman | Trib Total Media
Travis & Meagan Brannon look over a home in Rosslyn Farms with John Shutey, a realtor with Berkshire Hathaway, right, on Tuesday, Dec. 29, 2015.
Justin Merriman | Trib Total Media
Travis & Meagan Brannon look over a home in Rosslyn Farms on Tuesday, Dec. 29, 2015.
Justin Merriman | Trib Total Media
Travis & Meagan Brannon look over a home in Rosslyn Farms on Tuesday, Dec. 29, 2015.
Justin Merriman | Trib Total Media
Travis & Meagan Brannon look over a home in Rosslyn Farms on Tuesday, Dec. 29, 2015.
Justin Merriman | Trib Total Media
Travis & Meagan Brannon look over a home in Rosslyn Farms with John Shutey, a realtor with Berkshire Hathaway, right, on Tuesday, Dec. 29, 2015.

Friends told Lisa and Jon Maielli that the money they spent to rent their Morningside duplex would better serve them if they invested in a house.

The Maiellis looked into it, even checked out a couple of properties, but have since put the search on hold.

“I think we really started looking at the costs and we thought, we love the area where we are now and to buy would be so expensive,” Lisa Maielli, 26, said.

The Maiellis aren't the only young renters who are in no rush to buy a home.

First-time buyers are becoming an increasingly smaller share of overall homeowners, the impact of which could ripple throughout the housing market.

Expanding job opportunities and the prospect of rising mortgage rates would seem to compel people to move up plans for a home purchase. But countervailing pressures have prevented them from doing so.

Hefty student debt and rising rents have made it difficult to save for a down payment, real estate experts say. Rising house prices in hip urban neighborhoods where many 20- and 30-somethings want to live has created fewer affordable opportunities for first time buyers. And there is competition coming from investors and baby boomers looking to downsize.

The share of first-time buyers declined in 2015 for the third consecutive year and, at 32 percent of all buyers, is at its lowest point in nearly three decades, according to an annual National Association of Realtors' survey. The historical average is 40 percent.

Debt hurdle

It might be an opportune time to buy, but too few younger people seem able to take advantage. That has led to a troubling imbalance in the market that should concern anyone looking to put their house up for sale, said Jessica Lautz, managing director of survey research and communications at the National Association of Realtors.

“In a healthy market, you want buyers who are on the bottom of the rung and are going to climb up,” she said. “What we have is a market where a lot of people who owned their home for longer than they want to because they couldn't find a buyer. No one wants to be a homeowner in that situation.”

Debt has been the highest hurdle for many first-time buyers, delaying a purchase three years on average, according to the Association.

Lisa Maielli said she and her husband would have saved enough to buy a house were it not for their student loans, which cost them $1,000 per month.

“I think I'd almost have a down payment on a house for what I've paid on that so far,” she said.

Travis Brannon, and his wife, Meagan, have spent the past couple of years trying to build up their finances to a point where they could begin to think about buying. They have been pre-qualified for a mortgage and only recently began house hunting.

Brannon, an oil and gas attorney, said it has been a challenge to build a nest egg while paying down student loans and covering the rising rent costs. Brannon estimates he spends more than $1,600 per month on his student loans and about $2,000 in rent and other expenses for his Downtown apartment.

“The rent increases every year,” he said.

Older renters

Pittsburgh is considered among the more affordable metro markets in the United States for renters, but prices have risen significantly. The median rent price for a two-bedroom apartment in Pittsburgh was $950 in October, a 35.7 percent increase since 2011, according to the latest data from Seattle real estate data tracker Zillow. Median rents nationally in metro markets increased 20 percent, to $1,500, for the same sized apartment.

The price increases are particularly acute in areas of the city that attract younger renters, such as East Liberty, Oakland, Lawrenceville and Shadyside, said Howard Engelberg, managing partner of Prudential Realty Co. in the South Side. For years, rents in those areas were below $1 per square foot, he said. Now the average is $1.87.

Brannon, 29, said his decision to buy a home was more than a financial calculation. He enjoys the flexibility of renting and, until recently, wasn't prepared to set down roots. Some of his peers are waiting longer.

“Generally, people wait longer to do the American dream, white picket fence and two kids,” he said. “Maybe people are being more cautious with what we've witnessed with the recession, people are measuring twice, cutting once in terms of these big financial decisions. I'm only now just kind of comfortable with the idea of doing this.”

A recent report from Harvard University's Joint Center for Housing Studies found that 51 percent of renters are now older than 40, up from 47 percent a decade ago.

Jaded buyers

The shift to older renters reflects demographic trends and the residual effects of the foreclosure crisis, in which middle-aged households bore the brunt of the crash, said Chris Herbert, the Center's managing director.

But there is also a shift in attitudes that is persuading people to rent longer, said Tom Hosack, president of Northwood Realty Services. Some younger people became jaded with homeownership after seeing their parents take a financial hit during the bursting of the housing bubble, he said. Plus renting offers convenience, flexibility and amenities without the headaches of maintaining a home. Many young people crave those benefits more than building equity, he said.

“With apartments, the amenities package that they get is much better than a starter home,” he said. “I think a lot of them feel like, ‘I'm going to save up a little money until I get a promotion and then buy a nicer house.' ”

Maielli, of Morningside, said she still thinks homeownership is a good investment. But the decent options in her neighborhood are beyond her price range, and she doesn't want to move away from her friends and the amenities of the city.

Now might be a good time to buy. But she thinks she can afford to wait.

“I don't think we're in as much of a rush,” she said. “I'm young and I want to be in the city and enjoy it. That's where I'm at right now.”

Chris Fleisher is a staff writer for Trib Total Media. He can be reached at 412-320-7854 or cfleisher@tribweb.com.

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