Why There Are Fewer Homeowners Under Age 35
According to the U.S. Census Bureau, homeownership rates for people under 35 years old have decreased from 2005 to 2010. The homeownership rate for people 30 to 34 years old has decreased 9%; for people ages 25 to 29 years old the homeownership rate has decreased 10%; and the rate of homeownership for people under 25 has decreased 11% for this time period.
Yet overall homeownership rates have actually increased about 3% in Massachusetts, from 63.4% in 2005 to 65.3% in 2010.* In the past, people ages 24 to 35 accounted for a large percentage of first time home buyers. In February of this year, however, the Massachusetts Association of Realtors ® reported that the median age of a first-time home buyer was 32, up from age 30 in 2009.**
Why Are There Fewer Homeowners Under 35?
Young home buyers are more cautious than they have been in the past. They used to look at buying a home as an investment they could turn around and sell for a profit in just a couple of years. But now, home buyers are beginning to realize they will need to live in their home longer in order for the home value to appreciate. This has resulted in young home buyers wanting to look at more properties—and take longer to make the purchase—than before. Since they know they will live in the home for a long time, they are more selective about finding a home with all of the features they want.
The housing crisis has also changed their opinion of homeownership. As we mentioned in January when we discussed the increase in Boston rents, some people aren’t ready to purchase because they perceive an uncertainty in the market. They hear about home prices collapsing and they don’t want to buy a home that will lose value, especially if they know they will live in it for a long time. But we have actually seen home prices increase in many Massachusetts towns, including Watertown, Worcester, and Peabody. NAR reports the national median existing-home price for all housing types rose 10.1 percent to $177,400 in April from a year ago. The average selling price for all home types in Massachusetts is $332,654, an increase of .67 percent over last April. Yet the perception that home values are decreasing persists.
Financially many younger home buyers aren’t in the position to purchase a home. Student loan debt is preventing many younger home buyers from buying. The unemployment rate for recent graduates is higher than it is for the overall population. And many younger people believe they have to put down at least 20% on a new home, but this isn’t always true. There are many low and no down payment options for home buyers.
For instance, Massachusetts residents with modest incomes may be eligible for MassHousing Loans, many of which only require a 3% down and in some loans include a no down payment option. Many Massachusetts Veterans aren’t aware they may be eligible for a VA Loan, which requires no down payment or mortgage insurance. Many home buyers are reluctant to buy a home because they don’t know about these options.
Now that home prices are showing signs of stabilizing younger home buyers should take advantage of these great loan options and record low mortgage rates—which are the lowest they’ve ever been. It won’t be long before the rates climb back up.