Andy and Stacie Proctor stand in their new home in Utah in the US. For some millennials looking to buy their first home, the hunt feels like a race against the clock. AP
Andy and Stacie Proctor stand in their new home in Utah in the US. For some millennials looking to buy their first home, the hunt feels like a race against the clock. AP
Andy and Stacie Proctor stand in their new home in Utah in the US. For some millennials looking to buy their first home, the hunt feels like a race against the clock. AP
Andy and Stacie Proctor stand in their new home in Utah in the US. For some millennials looking to buy their first home, the hunt feels like a race against the clock. AP

Young homebuyers in the US scramble as prices rise faster than incomes


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For millennials looking to buy their first home, the hunt feels like a race against the clock.

In the seven years since the housing crash ended, home values in more than three-quarters of US metro areas have climbed faster than incomes, according to an Associated Press analysis of real estate industry data provided by CoreLogic.

Whereas before you could have a young couple buy a place and only one of them would work. Now, you need both of them to work.

That gap is driving some first-timers out of the most expensive cities as well as pressuring them to buy something before they are completely priced out of the market.

The high cost of home ownership is also putting extreme pressure on 20- and 30-somethings as they try to balance mortgage payments, student loans, child care and their careers.

"They do want all the same things that previous generations want," says Daryl Fairweather, chief economist for the brokerage Redfin. "They just have more roadblocks, and they're going to have to come up with more creative solutions to get the homes that they want."

A Redfin analysis found these buyers are leaving too-hot-to-touch big-city markets — among them, San Francisco and Seattle, where the tech boom has sent housing prices into the stratosphere. The brokerage found that many millennials are instead buying in more reasonably priced neighbourhoods around places like Salt Lake City, Oklahoma City and Raleigh, North Carolina. That, in turn, is driving up housing prices in those communities.

Jake and Heather Rice, both 35, moved to Utah last year from Mountain View, California, where the biggest employers are tech giants such as Google, Symantec and Intuit and the median home price is a dizzying $1.4 million or so.

The couple and their three children settled into a 418 square metres house in fast-growing Farmington, just far enough away from Salt Lake City to feel rural but minutes from a major shopping centre and Heather's sister. They did not disclose the purchase price for the sake of privacy, but they said their monthly mortgage payments will be $3,000, roughly the same as the rent for their former two-bedroom, 93 sq metres apartment in Mountain View.

"We didn't expect to stay in California because of how ludicrous the prices had become," says Mr Rice, a mechanical engineer who works in the medical device sector.

Nationally, home prices since 2000 have climbed at an annual average rate of 3.8 per cent, according to the data firm CoreLogic, while average incomes have grown at an annual rate of 2.7 per cent. And in the metro areas with the strongest income growth — for example, parts of Silicon Valley — home prices have risen even faster.

The Salt Lake City area is among the hottest spots for first-time buyers in part because of a staggering burst of home construction and a surge of high-tech jobs. The suburb of Lehi, which served as a film location for the 1984 Kevin Bacon movie Footloose, about a rural town that banned dancing, is in what is now known as "Silicon Slopes" because Adobe, eBay and Microsoft have opened offices there.

Of course, the influx of people from unaffordable cities is contributing to the very problem they were trying to escape: home prices in the greater Salt Lake City area surged 10.8 per cent in the past year, while average incomes rose only 3.9 per cent, according to figures from CoreLogic and the US Bureau of Labour Statistics.

Scott Robbins, president of the Salt Lake Board of Realtors, sees the price growth as having changed the habits of first-time buyers. They are putting less money down and carrying more debt. And some first-time buyers are looking at condos and duplexes instead of houses.

There is also more pressure on families to earn two incomes, rather than letting one choose to be the stay-at-home parent. This could be a particular challenge in the Salt Lake City area, where families are generally larger, and about 28 per cent of the population is under 18, compared with nearly 24 per cent nationwide.

"The one thing that really would make it even more sustainable is if wages would increase," Mr Robbins says. "Whereas before you could have a young couple buy a place and only one of them would work. Now, you need both of them to work."

Andy and Stacie Proctor made a bid on a house in the Salt Lake City suburbs, only to rescind it upon learning there were 13 rival offers. At one point, they almost decided not to buy a house just yet, figuring the bubble was going to burst eventually, says Mr Proctor, 35, who hosts the podcast More Happy Life.

But there was also the opposite risk: "There is the question about whether it's going to keep going up," his wife, Ms Proctor, 31, says.

The couple ultimately made a successful offer on a three-bedroom house for $438,000 in Vineyard, Utah. It includes an apartment that could be rented out to defray their mortgage payments. That will make it easier for them to afford starting a family.

Roughly one in six homes sold in the Salt Lake Valley since 2004 have been in a 1,660- hectare development called Daybreak, being built on land once owned by mining giant Rio Tinto. About 5,500 homes have been constructed, with an additional 14,500 units planned — enough in total to house roughly 65,000 people.

The homes range from $180,000 to $1 million. One of the guiding principles is that homeowners can upgrade or downsize without having to move out of the neighbourhood.

But that cycle of upgrading might not continue as it did for past generations. Home values need to rise for people to build equity that they can use to buy a new house. Yet if they rise too fast, it will become too expensive for many people to move up.

Parry Harrison, a divorced father, 26, of two small children, bought a townhouse in Daybreak for $309,000 in March. His down payment came in large part from selling his previous home, which appreciated a robust 25 per cent in the two years he owned it. He hopes to upgrade again in five years, when his children might need more space.

"It's definitely not a forever home," he says. "It's a lot more convenient if I have move-up opportunities that are right next door."

SHAITTAN
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5 of the most-popular Airbnb locations in Dubai

Bobby Grudziecki, chief operating officer of Frank Porter, identifies the five most popular areas in Dubai for those looking to make the most out of their properties and the rates owners can secure:

• Dubai Marina

The Marina and Jumeirah Beach Residence are popular locations, says Mr Grudziecki, due to their closeness to the beach, restaurants and hotels.

Frank Porter’s average Airbnb rent:
One bedroom: Dh482 to Dh739 
Two bedroom: Dh627 to Dh960 
Three bedroom: Dh721 to Dh1,104

• Downtown

Within walking distance of the Dubai Mall, Burj Khalifa and the famous fountains, this location combines business and leisure.  “Sure it’s for tourists,” says Mr Grudziecki. “Though Downtown [still caters to business people] because it’s close to Dubai International Financial Centre."

Frank Porter’s average Airbnb rent:
One bedroom: Dh497 to Dh772
Two bedroom: Dh646 to Dh1,003
Three bedroom: Dh743 to Dh1,154

• City Walk

The rising star of the Dubai property market, this area is lined with pristine sidewalks, boutiques and cafes and close to the new entertainment venue Coca Cola Arena.  “Downtown and Marina are pretty much the same prices,” Mr Grudziecki says, “but City Walk is higher.”

Frank Porter’s average Airbnb rent:
One bedroom: Dh524 to Dh809 
Two bedroom: Dh682 to Dh1,052 
Three bedroom: Dh784 to Dh1,210 

• Jumeirah Lake Towers

Dubai Marina’s little brother JLT resides on the other side of Sheikh Zayed road but is still close enough to beachside outlets and attractions. The big selling point for Airbnb renters, however, is that “it’s cheaper than Dubai Marina”, Mr Grudziecki says.

Frank Porter’s average Airbnb rent:
One bedroom: Dh422 to Dh629 
Two bedroom: Dh549 to Dh818 
Three bedroom: Dh631 to Dh941

• Palm Jumeirah

Palm Jumeirah's proximity to luxury resorts is attractive, especially for big families, says Mr Grudziecki, as Airbnb renters can secure competitive rates on one of the world’s most famous tourist destinations.

Frank Porter’s average Airbnb rent:
One bedroom: Dh503 to Dh770 
Two bedroom: Dh654 to Dh1,002 
Three bedroom: Dh752 to Dh1,152 

THREE POSSIBLE REPLACEMENTS

Khalfan Mubarak
The Al Jazira playmaker has for some time been tipped for stardom within UAE football, with Quique Sanchez Flores, his former manager at Al Ahli, once labelling him a “genius”. He was only 17. Now 23, Mubarak has developed into a crafty supplier of chances, evidenced by his seven assists in six league matches this season. Still to display his class at international level, though.

Rayan Yaslam
The Al Ain attacking midfielder has become a regular starter for his club in the past 15 months. Yaslam, 23, is a tidy and intelligent player, technically proficient with an eye for opening up defences. Developed while alongside Abdulrahman in the Al Ain first-team and has progressed well since manager Zoran Mamic’s arrival. However, made his UAE debut only last December.

Ismail Matar
The Al Wahda forward is revered by teammates and a key contributor to the squad. At 35, his best days are behind him, but Matar is incredibly experienced and an example to his colleagues. His ability to cope with tournament football is a concern, though, despite Matar beginning the season well. Not a like-for-like replacement, although the system could be adjusted to suit.

SERIES SCHEDULE

First Test, Galle International Stadium
July 26-30
Second Test, Sinhalese Sports Club Ground
August 3-7
Third Test, Pallekele International Stadium
August 12-16
First ODI, Rangiri Dambulla Stadium
August 20
Second ODI, Pallekele International Stadium
August 24
Third ODI, Pallekele International Stadium
August 27
Fourth ODI, R Premadasa Stadium
August 31
Fifth ODI, R Premadasa Stadium
September 3
T20, R Premadasa Stadium
September 6

Specs

Engine: 51.5kW electric motor

Range: 400km

Power: 134bhp

Torque: 175Nm

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Test

Director: S Sashikanth

Cast: Nayanthara, Siddharth, Meera Jasmine, R Madhavan

Star rating: 2/5