Cal State Fullerton assistant professor of finance and real estate expert Jia Xie

Jia Xie, assistant professor of finance

As millennials now make up the largest generational cohort in the United States, their impact on the real estate market could be immense. But according to a recent survey, more than four in five millennials – young adults between 20 and 40 years of age – anticipate greater difficulty in buying compared to their parents and grandparents. Only 48% desire to own a home, and high costs and lack of personal financial acumen are major roadblocks.

With median home listing prices of $289,000 nationally and $798,000 in Orange County according to Zillow, real estate purchases may not be within reach for today’s young people. But according to Jia Xie, assistant professor of finance at Cal State Fullerton’s Mihaylo College of Business and Economics, it doesn’t mean that homeownership isn’t a benefit to millennials.

“They need more education on mortgages and personal finance in general. They need to better understand the benefits and costs of being a homeowner, including the ability to build personal wealth by owning real estate,” said Xie in an Oct. 13 article published in The Dallas Morning News, one of America’s most widely circulated newspapers.

Getting firsthand knowledge from friends and family who have bought homes is one way for millennials to gain the market IQ they need to consider a purchase.

“Talk to people who have purchased homes and ask them how their lives have changed after becoming homeowners, and what their main challenges are,” Xie counsels young adults. “Do not talk too early to a real estate agent or a mortgage broker. Yes, they are experts and professionals who can be very helpful after you’ve decided to enter the housing market, but their opinions can be very biased.”

Coming of age during the housing-triggered Great Recession and related financial crisis was a major trauma inflicted on the millennial generation, making them wary of housing purchases, alleges Xie. But the same may not be true of Generation Z, who are still primarily teenagers or very young adults but will be making waves in the adult world soon.

“Generation Z lives at a time of real estate market recovery, and they have never experienced any market correction, so they have a more positive attitude toward homeownership,” he says.

When Homeownership Isn’t For You

Though Xie is quick to highlight the many benefits of homeownership to millennials – pride of ownership, equity, stability, tax deductions and long-term financial rewards – he also advises that owning a home isn’t right for everyone.

“It is only good for households who already have enough savings for the down payment and stable income enough to cover the financial obligations, such as mortgage payments, property taxes and insurance,” he says. “Homeowners should also have additional savings to cover unexpected bad events, such as unemployment, illness and repairs.”

How to Get Started as a Future Homeowner

Want homeownership to be in your future? Xie recommends that young people start saving now.

“Set up an automatic contribution from paychecks into an investment or savings account; carry small installment loans, such as auto loans or credit cards, and pay the full balance by the due date; pay all utility bills in full when they’re due; and save for specific goals, such as a $1,000 vacation,” he says.

While the astronomical cost of housing in coastal Southern California may be daunting to millennials, Xie advises them to live in close proximity to their work, rather than considering more affordable but geographically distant housing options.

“If you work in Orange County, buy in Orange County, for a few reasons. First, time is too precious to be wasted on the road. With the increasing population, we can expect the commute time to be even longer in the future,” he says. “Secondly, remote real estate markets tend to be more volatile and illiquid, so you may have a hard time selling in the future.”

Xie sees SB 330, a new bill signed by California Gov. Gavin Newsom making the permitting process easier and simpler for real estate developers, as a panacea for high housing costs, since it will provide more incentive for building in urban cities, thus increasing supply.

About Professor Xie

Xie’s research interests are studying the role and added value of real estate agents in the housing market and how they are impacted by recent technological advances, such as the internet and mobile technology. He is also interested in studying the formation and importance of real estate professional networks.

He is a member of the American Real Estate and Urban Economics Association and the Financial Management Association.

See Xie’s research online.

During his free time, Xie enjoys playing soccer, watching movies and reading, as well as engaging in do-it-yourself repair projects at his home.

For More on Real Estate Education

Interested in pursuing a career in real estate? Mihaylo College’s Center for Real Estate supports academic programs and networking and career development opportunities for Titans of all majors. For more information, visit the center online. Or read more of our articles on real estate.