Buying a home has long been a lucrative wealth-building strategy, but new data shows how much first-time buyers can benefit from buying early.
Americans who bought their first home at age 30 saw a 22.5% increase in their value by age 50, compared to those who waited until age 40, according to a Realtor.com report released Thursday. The benefit — which the authors refer to as a “wealth multiplier” — translates to a net worth of $119,000 on average.
Everything boils down to time in the market, experts say.
“By having more years of appreciation and mortgage payments, first-time buyers are building a foundation of wealth that supports opportunities for the next generation,” said Danielle Hale, chief economist at Realtor.com, in a statement about the report.
In other words, the earlier you buy a home, the more time you have to build equity in it and enjoy the benefits of appreciation. However, not all the so-called “wealth multiplier” comes from the home itself. The report also notes that owning a home provides a degree of financial stability that supports savings and investments elsewhere, contributing to capital gains.
|
Age to buy first home |
The extra money is priced at age 50 |
Increase in nominal value (in dollars) |
|---|---|---|
|
28 out of 32 |
22.5% |
$119,000 |
|
33 out of 37 |
11.2% |
$59,000 |
|
38 out of 42 |
1.5% |
$8,000 |
|
43 out of 52 |
0% |
$0 |
The truth about buying a home at 30
For decades, buying a home at age 30 or earlier was the norm. These days, it’s a better situation for most Americans.
According to the National Association of Realtors, or NAR, the average age of a first-time home buyer is now 40 years old. In the 1990s and most of the 2000s, first-time buyers were often in their 30s.
Then the COVID-19 pandemic devastated the housing market, driving up prices almost overnight… and driving out a lot of small buyers. They now face a very different home buying reality than previous generations.
In 1990, the median home price was $96,800, while the median household income was $31,000, a ratio of about 3-to-1, according to Realtor.com. Home prices are now $418,000, and incomes are $85,000, by a ratio of nearly 5-to-1.
A separate study from Harvard University’s Joint Center for Housing Studies found that the price-to-income ratio for buying a home has reached record highs recently.
“Because housing prices are so high relative to household incomes, consumers need to save more and longer to get a down payment,” research analyst Peyton Whitney wrote in the group’s October report. “Low down payments are already a significant barrier to homeownership, especially for first-time buyers, young people, and households of color.”
Today it takes the average family about 10 years to save enough for a down payment, while it took just over three years to do so in the 1990s, according to a report by Realtor.com.
“Home ownership has long been one of the most reliable ways for families to build and pass on wealth,” said Damian Eales, CEO of Realtor.com, in a statement. “But today, many young people are stuck on the sidelines because buying a home has become unaffordable.”
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