When we talk about building wealth, homeownership is historically one of the biggest steps for young adults in America. It's not just about having a place to call your own — it's about creating financial stability and building long-term wealth through home equity. But let's face it, the journey to homeownership is not always as smooth as we hope, especially with the financial challenges many Zoomers (Gen Zers) and Millennials face today.
According to a survey by Bankrate, society often expects young adults to buy their first home around age 28. However, a report by Clever Real Estate reveals a different reality. Many college graduates burdened with student loans don't see homeownership as a possibility until they reach 35 — a whole seven years later!
Even those lucky enough not to have student debt are pushing their homeownership plans to around age 30. You see, this homeownership delay, whether due to student debt or other factors, can be a roadblock to wealth-building. Why? Because owning a home is a tried-and-true way of building wealth.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
In fact, home equity and retirement accounts often make up about 60% of a household's net worth, according to the U.S. Census Bureau and the National Association of Realtors. The Clever Real Estate report found that nearly half of undergraduates with student debt plan to delay buying a house because of their loans. A study by the Federal Reserve shows the reality of this impact. For every $1,000 increase in student loan debt, homeownership rates decrease by about 1.5%. This means an average delay of about 2½ months in becoming a homeowner.
Breaking through the barriers
Delaying homeownership can have long-term effects. It's not just about missing out on building equity — it also impacts overall financial stability. Homeownership brings a sense of security, allowing people to put down roots in a community and benefit from potential property value appreciation. But by pushing back homeownership, young adults lose out on these financial growth opportunities.
Yes, the challenges of student loan debt and rising education costs can be intimidating. But guess what? There are strategies that young adults can adopt to tackle these obstacles and turn their homeownership dreams into reality.
1. Financial education and planning.
Knowledge is power. Young adults should invest time in financial education and seek advice from professionals. This would help them understand their options and map out a realistic plan toward homeownership. This includes understanding student loan repayment options, effective budgeting and saving strategies for a down payment.
2. Exploring alternative paths.
There's more than one way to become a homeowner. Consider buying a smaller starter home or looking into shared ownership arrangements. These options can help young adults enter the housing market sooner and start building equity.
3. Seeking down payment assistance.
Did you know that there are down payment assistance programs at local, state and federal levels? These programs can provide financial help to young adults trying to save for a down payment. To learn more about your eligibility for these programs and how to apply, talk to your trusted mortgage and tax professionals and visit the appropriate federal, state and local websites.
4. Prioritizing debt repayment.
It might be tempting to delay student loan payments to save for a down payment, but finding a balance is key. Prioritizing debt repayment can help improve credit scores and increase the chances of qualifying for a mortgage with favorable terms.
5. Exploring rent-to-own options.
Rent-to-own arrangements offer a chance to rent a property with the option to buy it later. This can be a practical option for those who want to start building equity while working toward homeownership.
Financial institutions and professionals have a crucial role in guiding young adults through the challenges of delayed homeownership. By providing educational programs, custom financial products and personalized advice, these institutions can empower young adults to make informed decisions and navigate the path to homeownership.
Delayed homeownership among young adults in America, especially due to student loan debt, is a real issue that needs attention. But with the right understanding of the long-term impacts and proactive steps toward homeownership, young adults can overcome these hurdles and lay the foundation for long-term financial security.
Related Content
-
Berkshire Hathaway's in the 100,000% Return Club. No Surprise HereWarren Buffett's fascination with the insurance industry has helped Berkshire Hathaway's stock return snowball.
-
4 Turnaround Stocks to Consider – and 2 More to Keep an Eye OnA turnaround stock is a struggling company with a strong makeover plan that can pay off for intrepid investors.
-
Facing a Layoff? Ask Your Employer These Questions NowIf you're being laid off or forced into early retirement, don't make any decisions without proper guidance — and that starts by asking some key questions.
-
Have $1M+ Saved? Consider a Financial Planning One-Stop ShopA 'one-stop shop' team — including a financial planner, estate planning lawyer, CPA and more — could serve all of your tax, estate and retirement planning needs.
-
Five Ways to Safeguard Your Portfolio in Market DownturnsThe stock market is nothing if not volatile these days. When it takes a dip, a well-managed, properly diversified portfolio could help you ride out the storm.
-
This Underused IRA Option Offers Tax Benefits and Income SecurityLooking to avoid running out of money in retirement? Consider longevity protection provided by a QLAC as a component of your retirement income plan.
-
These Four Books Explore How to Leverage Our Outrage PositivelyThe authors offer some powerful tools to help us find solutions to discord rather than remaining silent or blowing up in anger.
-
Financial Pitfalls to Avoid in Your 30s, 40s and 50sAs you pass through each decade of working life and build wealth for retirement, watch out for the financial traps that can hinder your progress.
-
Five Key Retirement Challenges (and How to Face Them Head On)Life will inevitably throw challenges at you as you get older. But making a flexible retirement plan — and monitoring it regularly — can help you overcome them.
-
Four Action Items for Federal Employees With $2M+ SavedIf you can't stand the chaos, maybe you can walk off into the sunset of retirement. Here are some thoughts on how to figure out if that would work for you.
