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
-
Should You Add an Annuity to Your Retirement Portfolio in 2025?In need of some guaranteed income? An annuity may be the answer if you check off any of these boxes.
-
More SECURE 2.0 Retirement Enhancements Kick in This YearSaving for retirement gets a boost with these SECURE 2.0 Act provisions that are starting in 2025.
-
More SECURE 2.0 Retirement Enhancements Kick in This Year
Saving for retirement gets a boost with these SECURE 2.0 Act provisions that are starting in 2025.
-
Saving for Your Emergency Fund: As Easy as 1-3-6An emergency fund that can cover six months' worth of expenses is far easier to build if you focus on smaller goals at first.
-
The Wrong Money Question to Ask After Trump's ElectionIf you're wondering what moves to make with a new president moving into the White House, you're being dangerously shortsighted. Here's what to do instead.
-
An Investing Plan for This Year: Doing Less Can Lead to MoreAchieve more when investing in 2025 by planning to work smarter, not harder. These three strategies can help put you on the right track and keep you there.
-
All About Six Types of Auto Insurance CoverageDo you know what your auto insurance policy covers? Here's a primer on some coverage categories, along with examples of how each type of coverage works.
-
Social Security and Medicare Funding: Is the Sky Falling?Social Security and Medicare are slowly running out of money, but what does that mean for the retirees counting on them? Actually, it's not all bad news.
-
What We Need to Do to Protect Retirees' Financial SecurityCognitive decline and aging in general put older retirees at risk of losing their financial security when they're the most vulnerable. What can be done?
-
Financial Planning: Sisters Should Be Doin' It for ThemselvesMore and more women are ringin' on their own financial bells (with apologies to Aretha Franklin and Eurythmics) — but that demands a robust financial plan.
