Last year, while Whitney Buehler was in Croatia on her honeymoon, in the back of her mind was her home in Atlanta preparing for a summer of house hunting.
Ms. Buehler, 25, and her husband, Joey, 27, did not like renting and had discussed buying a home for two years before they got married.
During the pandemic, they had saved about $40,000 and were keeping an eye on the chaotic housing market. With their wedding over, they finally had the time and energy to plunge into their search head-on. After touring 15 houses, the Buehlers made three offers before one was accepted.
The property was under repair in the Ormewood Park neighborhood on Atlanta’s east side. It costs $389,000 and ticked all your boxes. It was right next to the BeltLine, a network of trails that Buehler uses to safely bike to work. It had a green yard filled with tulip poplars and three stately oaks. It had two bathrooms. The couple moved in last August.
The Buehlers are part of an enviable cohort of young adults making homeownership before the age of 30. Reaching such a milestone can seem like a tall order these days. The typical age for a first-time homebuyer is 36, according to a recent survey of the National Association of Realtors. When the survey was first conducted in 1981, the average age of first-time buyers I was 29. Home prices increased in the first two years of the Covid-19 pandemic and in recent months. fell only slightly from those peaks.
The cost of rent has skyrocketed in many cities, eroding tenants’ ability to save. Add in other forces, such as high student loan debt and wages that haven’t kept pace with inflation, it’s no surprise that young adults seem to be rent longer and become homeowners later, if ever. But despite it all, many are still making it. Twenty-nine percent of adults ages 18 to 29 owned their home in 2021, according to the Federal Reserve. found.
Good old-fashioned savings are usually not enough to afford a house in your 20s. This is especially true for young people just starting their careers. Those who manage to buy before the age of 30 often receive help from family or have well-paying jobs. But some are finding other paths to homeownership by settling in areas with a lower cost of living or turning to programs that help lower down-payment costs for qualified buyers.
For Ms. Buehler, becoming a young homeowner was made possible in large part by a $40,000 inheritance from her great-grandfather. He was earmarked for college tuition, but since he paid for his studies with scholarships and part-time work, most of that money was left untouched.
The inheritance covered half of the down payment. Mrs. Buehler and her husband split the remainder, prorating their contributions based on income. Her husband is studying for a Ph.D. in biochemistry, cell and developmental biology, and Mrs. Buehler is an EPA engineer. Her salary alone covers the monthly mortgage payments and bills.
Building Wealth Through Home Ownership
For renters, housing costs can fluctuate wildly from year to year, especially in places where landlords can raise rent without limit. Homeowners often opt for fixed-rate mortgages, which effectively lock in the cost of housing for decades and can insulate them from volatile economic cycles, said Jung Choi, a senior research associate at the Urban Institute, a think tank.
People who buy their first home before age 35 accumulate significantly more wealth at age 60 than those who do after that, according to a 2018 analysis by the institute. “At near retirement age, you’ve actually built up your wealth over a longer period of time,” Ms. Choi said. The sooner you buy your home, the more time it will have to appreciate in value and the more time you will have to pay off the mortgage debt.
Homeownership as a powerhouse for wealth is what Desiree Gaeta had in mind when she bought her first home at age 27, in the summer of 2020. At that time, Ms. Gaeta, who worked as a nurse, learned what he could about the power of homeownership through his peers. Her parents hadn’t become homeowners until middle age, so she wondered if she could do it when she was 20 years old.
A nurse who also worked as a real estate agent explained to Gaeta how to calculate what she could afford. For years, Ms. Gaeta had been putting money into a savings account, and she was surprised to learn that she had enough for a down payment on a house in Charlotte, North Carolina. As a first-time homebuyer, she qualified for a loan from the Federal Housing Administration. , a government-insured mortgage that required Gaeta to pay just a 3.5 percent down payment, based on her credit score.
He purchased a newly built four-bedroom, two-and-a-half-bathroom starter home for $290,000. The home is now valued at more than $400,000, she said, thanks in part to an active housing market.
Gaeta quit her job as a nurse and is now a real estate broker, sharing tips on TikTok with younger shoppers.
“A lot of people want the house of their dreams,” he said. “I see it as a springboard, a way to create generational wealth for my family.”
Buying a home as an investment opportunity
Brian Chu, 27, had no plans to become a homeowner until the investment opportunity arose. In 2020, he moved to Los Angeles to work as an administrative assistant at a private school for children with learning difficulties. Initially, the job included free accommodation, but after a year, Mr. Chu had to find his own place. His father made a generous suggestion: What if he bought his son a condo to avoid paying high rents in Los Angeles?
At first, Mr. Chu hesitated. His career was just getting started and there was a chance he might have to move as his employer expanded. He wasn’t sure about buying property in a city he might not live in long term. But he realized that a condo could become a source of rental income.
The father-son pair ended up buying a two-bedroom condo in the Sherman Oaks neighborhood for $600,000. Mr. Chu invested his savings in the purchase, covering about 5 percent of the cost; his father provided the rest. They then used delayed financing to obtain a mortgage, a process that allows buyers to obtain a loan on their new home after paying off it. (Buyers can make cash offers, which are more attractive to sellers, and then get that money back to keep on hand.) The condo mortgage payment is around $1,100 a month, and Mr. Chu is responsible for covering it.
From Mr. Chu’s point of view, the past plays a huge role in his fortunate position in the present. His grandparents owned textile businesses in Hong Kong between the 1950s and 1970s, when the city experienced high economic growth. That success allowed them to help Mr. Chu’s parents immigrate to the United States, where they built successful careers of their own in the fields of medicine and software.
“When it comes to hard, cold numbers, I think it’s really helpful to be transparent,” Chu said. “I was able to do this because my parents helped me a lot. And then they were able to do it thanks to their parents.”
Eventually, Mr. Chu moved to Seattle, where his employer opened another school. He is now simultaneously a tenant and owner. The rent your tenants pay for the condo in Sherman Oaks covers your mortgage and HOA fees, leaving you with about $1,500 in supplemental income a month, helping you keep up with the high cost of life in Seattle.
A pathway for low-income households
While homeownership is a tool for building wealth, it is not accessible to all Americans. Racial chasms in homeownership persist in large part due to the long-term effects of racially exclusive housing policies, such as redlining and predatory lending. Black households, on average, have significantly less wealth than white households, which means less money families can transfer to help younger members buy a home.
Ms. Gaeta, the North Carolina real estate agent, paid the down payment without the help of her family. “It’s not that they didn’t want to,” she said. “It’s that they couldn’t.”
Ms Choi of the Urban Institute wants policies to level the playing field to make it easier for renters to become homeowners. “Homeownership cannot be separated from its investment aspect,” she said. “And as the investment side of the pie grows, that will definitely exacerbate inequality.”
In recent years, local governments and non-profit organizations have introduced a variety of initiatives aimed at helping low-income residents buy their first home.
Two years ago, Akirah Pressley, then 29, achieved her goal of becoming a homeowner. Born and raised in Philadelphia, Pressley was on the go a lot as a child, often moving from one tutor to another. When she became a young mother, she dreamed of owning a home of her own and giving her children the stability she never had.
She lived in rental houses for about a decade and received monthly assistance from the federal housing voucher program known as Section 8. Through the city’s housing authority, she contacted a financial counselor, who told her about several funds that could help her establish herself. her to own a home.
One program, for example, offers grants from up to $10,000 for low-income first-time homebuyers, and another encourages people to save by providing a $2 match for every dollar saved up to $2,000. Ultimately, with the help of these resources, Ms. Pressley saved $16,000 for a down payment.
In 2021, he bought a three-bedroom, one-bathroom home in the Lawncrest neighborhood of Northeast Philadelphia for $160,000. It’s a step up from his old rental in almost every way: a library, grocery store, park, and community center are within walking distance.
“It was an overwhelming feeling,” Pressley said of the moment she signed the papers and became a homeowner. “It was also a relief. It was emotion. They were heavy tears. It was amazing.” She considers that milestone “the greatest achievement of my life.”