More First-Time Homebuyers Are Joining Forces with Friends

Co-Buying Gains Popularity Among Millennials

With skyrocketing home prices and a shortage of available properties, many first-time homebuyers are finding it increasingly challenging to enter the housing market. A growing trend among them is co-buying homes with friends.

This shift is partly driven by Millennials delaying marriage and parenthood, often burdened with significant student loan debt that makes saving for a down payment difficult. In today’s competitive market, achieving homeownership can feel nearly impossible for many.

While co-buying with friends still represents a small percentage of all home purchases, the trend is on the rise. According to The Wall Street Journal, since Millennials became the largest segment of homebuyers in the U.S. in 2014, co-buying among individuals with different last names surged by 771% from 2014 to 2021, as reported by real estate analytics firm Attom Data Solutions.

For some, this arrangement is a dream come true. “We split everything three ways, so it’s cheaper to live,” said Amanda Scheider, who co-owns a home in Gallatin, Tennessee, with friends Kathy Keel and Stephanie Vandergrift. “If you have good friends, you have a lot in common... it’s like a permanent sleepover.” They purchased their 3-bedroom, 2.5-bathroom home in 2020 and have no immediate plans to move, focusing instead on their careers.

The Challenge of Homeownership

The past year was unprecedented for the housing market, making it even harder for first-time buyers to enter. In June, the median home sale price reached $386,000—up 24.4% year-over-year—while inventory plummeted to an all-time low, according to Redfin. With just 1.38 million homes available, down 23% from the previous year, many young buyers find themselves priced out.

Moreover, home prices have escalated far more rapidly than incomes. From 1960 to 2017, median home prices increased by 121% when adjusted for inflation, while median household income rose by only 29%. Although some younger Americans are closing the wealth gap with older generations, many still face the burden of substantial student loan debt.

The Rise of Co-Buying

The increasing trend of purchasing homes with friends or partners is reflective of a decline in married homebuyers. According to the National Association of REALTORS®’ 2021 Profile of Homebuyers and Sellers, about 60% of homebuyers are married couples, down from 81% in 1985.

The COVID-19 pandemic likely amplified this desire among first-time buyers to secure homeownership, even if it meant teaming up with friends. Jessica Lautz, Vice President of Demographics and Behavioral Insights at NAR, noted that during the pandemic, many renters sought more space and considered co-buying with roommates.

However, co-buying comes with legal and logistical challenges. The New York Times suggests potential co-buyers ask themselves four key questions:

1. How will ownership and equity be divided?
2. Who will hold the mortgage?
3. How will repairs, upgrades, and maintenance be managed?
4. What happens if the relationship or friendship ends?

Legally, there are two primary types of co-ownership: joint tenancy and tenancy in common. Joint tenancy is often preferred by unmarried couples or family members, as it allows ownership rights to pass to co-owners upon death. Conversely, tenancy-in-common agreements are more common among friends and roommates, allowing ownership to be passed to heirs rather than co-owners.

Anyone considering co-buying should take time to discuss the arrangement and create a formal agreement with legal guidance. “We must assume that people’s lives will change,” advises real estate attorney Andy Sirkin. “You want a document that provides solutions.”

In addition to legal considerations, effective conflict resolution skills are crucial, as homeownership involves shared financial responsibilities and household tasks.

Ultimately, for first-time buyers feeling shut out of the housing market, co-buying with friends might be their best path to homeownership.