Millennials Dan and Diana Stoltzfus, the owners of a nearly $1 million mansion in Great Falls, Va., are among a small but growing number of young people in the Washington region who have the means to buy a luxury home.
“We owned a condo in Glover Park and wanted to buy a house so we could start a family,” said Diana Stoltzfus. “Everything we found in the city was small and would need renovation or an addition, so we started looking at Potomac and Great Falls for something that would fit in our budget of around $900,000. The house we found in Great Falls was originally priced at $1.1 million, but it had been on the market for almost a year, so we were able to buy it for just under $1 million.”
A surprisingly high number of millennials around the country and in the Washington region earn a high enough income to afford a $1 million residence. According to research by Zillow, Arlington has more millennials with a household income of $350,000 or more than any other jurisdiction in the country, with 8.7 percent of millennials among that wealthy cohort.
The District is also on the list, tied at eighth place with New York City, both places where 2.8 percent of millennials have a household income of $350,000 or more.
“There are lots of dual-income young couples in the D.C. area with high levels of education and good jobs who together can afford a luxury home,” said Jeff Detwiler, president and chief operating officer of Long & Foster Real Estate in Chantilly.
Stoltzfus works at an accounting firm, where she met her husband, Dan, who now is head of finance at Fundation Group, a small-business lender.
“Most of the millennials we see who have the money to buy a $1 million home are households with two lawyers,” said Daryl Judy, an associate broker with Washington Fine Properties. “Some also work for tech companies or are associated with bio-tech research. A surprising number of people in their early 30s that we’ve worked with are taking over their parents’ businesses.”
Rob Sanders, a senior vice president with TTR Sotheby’s International Realty in Washington, said that while millennial luxury buyers occasionally have a trust fund or other help from their parents, most of the ones he works with are using their own money.
“They’re quick to point out that they are a lobbyist or a venture capitalist or have been working as a lawyer for seven years even though they are young,” he said. “They’ve made their money on their own and are proud of it.”
A common challenge for even high-income earners is coming up with the cash for a down payment. Even a low 5 percent down payment on a $1 million purchase is $50,000, and a 20 percent down payment would be $200,000.
“The down payment issue causes some highly paid younger people to back away from a luxury home because if they only have the cash for a smaller down payment, then their monthly housing payment will be big,” said John Coplen, a real estate agent with Evers & Co. Real Estate in Washington.
However, Coplen said, many luxury millennial buyers have help from their parents or grandparents for the down payment or save the cash they receive as wedding gifts. One young attorney received a small inheritance that supplemented the money she saved for her home purchase.
Some parents view providing their children with the money for a home purchase as a transfer of wealth rather than a gift, said Leonard Steinberg, the New York-based president of Compass real estate brokerage.
He said they look at it as a chance to teach their children about the responsibility of homeownership and recognize that the money is something their kids would have received anyway as a future inheritance.
“Some high-earning millennials save money until they are in their early 30s to buy a place and just skip over that starter-home phase,” Judy said. “They’ll stay in an apartment until they can afford to pay for the place they want.”
Coplen worked with a couple who bought and renovated a condo in LeDroit Park when they were in their 20s and leveraged the profit from the sale to buy what will be a $1 million house in the H Street corridor once they finish renovating it.
“These are very savvy guys, one of whom is a lawyer, and they spent $100,000 on their first renovation project,” Coplen said. “It’s a very large condo, and they sold it in one day for $850,000. They were able to ride the wave of rising prices there and hope to do it again, but they also wanted to be in a house with a yard instead of a condo.”
Sanders and his business partner, Brent Jackson, an associate broker with TTR Sotheby’s, worked with a young couple, both attorneys, who purchased a home in the Navy Yard neighborhood four years ago for $785,000, which increased $250,000 in value.
“The sale of that property gave them a big down payment for their next place, plus their combined income is over $1.2 million,” Sanders said.
Judy said some of his millennial buyers are people relocating to D.C. from San Francisco or New York who have sold a property or are accustomed to paying astronomical rent, so purchasing a $1 million home can seem like a bargain to them.
According to Christie’s “Luxury Defined 2016” report, young, high-net-worth individuals, particularly entrepreneurs and tech industry employees with high incomes, are increasingly buying luxury-level real estate in New York City, San Francisco, Seattle and Miami, as well as in resort communities and the D.C. metro area.
“The places where the luxury market is strongest, such as the Pacific Northwest, San Francisco and New York City, have a lot of buyers with money from the tech industry,” said Dan Conn, chief executive of Christie’s International Real Estate in New York City. “The market is a little softer in Miami because of reduced demand from foreign buyers, but even that market is still okay.”
Conn said that in New York City, competition is particularly heated in the “affordable luxury”-category condos because inventory is low in that range.
Most millennial luxury buyers in New York are more likely to be on the lower end of the luxury market there, which Christie’s defines as homes priced from $3 million.
Steinberg said his company sees a strong wave of wealthy millennials buying property in large cities, particularly places known as tech hubs.
“These are well-educated, tech-savvy buyers who do a lot of research and know what they want,” he said.
Steinberg said that one unifying theme among millennials is their individualism, but the generation also shares common interests such as an emphasis on living in an interesting location with plenty of restaurants and nightlife.
“They like to cook so they want a good kitchen in their new place,” Steinberg said. “They’re also health-conscious, so they want a fitness center in their condo building or in the neighborhood. They also like spaces where they can socialize or collaborate, such as a roof terrace and indoor room where they can congregate.”
The youngest home buyers tend to prefer urban-style living, although some of the older millennials want the larger homes they can find more easily in the suburbs.
“In the D.C. area, millennials are focused first on being close to outside activity and to Metro,” Detwiler said. “Walkability scores that measure how easy it is to get places without a car are extremely important to this generation for both luxury buyers and other buyers. Higher prices also correlate to proximity to Metro.”
The Stoltzfuses bucked the trend of staying in the city once they realized how much more space they could get with their money in Great Falls, which is also within easy commuting distance of Dan’s job in Reston and Diana’s in Tysons Corner.
“We have three kids now and realized that our city lifestyle wouldn’t be the same once we had kids,” Diana Stoltzfus said. “We decided that if we weren’t going to live in the city, it would be better to have a country feel like we have in Great Falls.”
The Stoltzfuses’ home has nearly 5,000 square feet and sits on a one-acre lot, the minimum lot size allowed by zoning laws in Great Falls.
Stoltzfus has plans to build an outdoor kitchen on their property and update some spaces, which Coplen said is typical of his luxury millennial buyers.
“The younger buyers I work with have a keen design sense and are comfortable understanding a space and what can be done with it,” he said. “I call them the ‘HGTV generation.’ One young attorney I worked with bought and renovated one of the oldest homes in Logan Circle.”
More commonly, though, young wealthy millennials do not have time to renovate a property and want something new or newly renovated, Judy said.
“Young buyers often ask about resale values and are more concerned than some other generations about whether or not they are making a good investment,” he said.
In the past, $1 million properties were mostly found in Georgetown and Upper Northwest Washington, but today, millennials are purchasing luxury-priced homes all over the city.
“The choice of neighborhood often depends on whether someone can bike to work and get to the gym easily,” Judy said. “The buyers I work with are willing to pay more for a great condo rather than have to drive home and mow the grass.”
Jackson said some millennials are still buying in traditionally wealthy neighborhoods such as Georgetown, Dupont Circle and Capitol Hill, but they are also finding $1 million properties elsewhere.
“Some millennial-age luxury buyers want to be in a high-end condo with all the amenities, while about 50 percent want an attached or detached house where they can start a family,” Jackson said. “They’re buying all over the city from new penthouses at the Wharf in Southwest to new condos at the Westlight in the West End. They want to be near 14th Street or in Shaw or Eckington or near the H Street corridor or in Bloomingdale or Brookland because there are great restaurants and bars all over the city.”
Jackson said all four units at a new development in Shaw at 5th and O streets NW recently sold for $1.5 million each, and he recently worked with buyers who purchased a $1.5 million single-family house in Brookland, all prices unheard of in those neighborhoods just a few years ago.