Younger Homeownership is Smarter
Homeownership doesn’t enter the minds of many people until they feel like the time to settle down is close at hand, which explains why first-time buyers tend to be in their mid-30s. But it can really pay to get into the market much sooner. Especially if you keep in mind, your first house doesn’t have to be your dream house.
Buying a home earlier in life can seriously boost your financial picture in retirement. In fact, a study by the Urban Institute exposes the financial impact delaying homeownership can have on an individual’s overall financial picture as they near retirement.
When evaluating the financial health of homeowners in the study, it determined that those who purchased their first home between ages 25 and 34 had the greatest amount of wealth in their 60’s, while those who bought their houses later had significantly lower housing wealth.
Buying a home is an investment in an appreciating asset, meaning the value of the property will steadily increase. Building equity by repaying your home loan each month is in effect the same as putting money into a savings account and getting paid interest.
“Every day, I wish I still had the first home I ever bought,” Mike MacGuire, broker/owner with The Platinum Group, Realtors. “At the time it felt like a huge stretch for me, but now it’s worth significantly higher than what I paid.”
The longer buyers stay in their homes, the more cost-effective ownership becomes when compared to renting. Rents typically keep rising near the rate of inflation every year, and after years and years of paying higher rent, you end up with nothing to show for it.
In addition, while those who purchased a home before age 25 have less equity than those between 25 and 34, (primarily due to purchasing lower-priced homes), they also got the biggest bang for their buck by seeing the largest return on their investment.
Nevertheless, today’s young adults are choosing not to build housing wealth as previous generations did.
Due to student debt and marrying later in life, the rate of homeownership for millennials dipped to a low of 36.2 percent in 2014, according to U.S. Census data.
But, as people age into retirement, they are more dependent on their wealth than their income to support their lifestyle. Purchasing a home in your 20’s means it’s likely to be paid off by retirement age, allowing homeowners to tap into home equity to supplement retirement benefits, which will become increasingly more important as the U.S. struggles to fund Social Security.
Borrowing to buy a home is viewed by banks as a much safer investment than credit cards, especially while interest rates are still at rock bottom, making it difficult to label mortgage debt as a bad financial decision.
The bottom line is while home ownership seems like a daunting prospect, it’s still a smart financial move. It is a serious financial commitment, and everyone should think long and hard before jumping into it.
“My advice is always to think about how long you will be in the home,” MacGuire said. “If it’s only a couple of years, it’s not worth it. But if you at a point where you’ll stay in the home for a while, move ahead cautiously.”
If you think you’re ready to put down roots, buying a home can be financially and emotionally rewarding, and there are plenty of first-time buyers programs to help you get started.
Enlisting the help of an experienced Realtor who knows the market and the region is fundamental to a successful experience. The local experts at The Platinum Group, Realtors have the latest and greatest tools and resources, along with long-term relationships with the right people to help you out.
“Don’t feel pushed or pressured into anything,“ MacGuire said, “but if you are ready to buy a home, you should be prepared to act quickly.”
The Platinum Group, Realtors are ranked as the number one independent real estate firm in Colorado Springs and they are always happy to sit down for a no-obligation chat with prospective buyers and sellers who have questions before jumping into anything.
Many of the most common questions and topics that confuse new buyers’ are covered by MacGuire’s Real Estate Tips, online at http://buywithmike.com/real-estate-tips.
If you’re considering entering the real estate market, call now for a no-obligation consultation at 719-536-4326, or visit PlatinumHomesSales.com.