Buying a Home Before Turning 35

Data revealed by the Urban Institute points out that homebuying sentiment among millennials continues to erode with today’s young adults being less likely to buy a home compared to prior generations, who became homeowners at a younger age.

Analyzing the consequences of this trend, Urban Institute elucidated on the consequences of not buying a home before the age of 35. Most of today’s older homeowners bought their first homes before age 35, according to the report that used the Panel Study of Income Dynamics (PSID), a dataset that has followed U.S. individuals since 1968, to track people who reached age 60 between 2003 and 2015.

The report found that half the older adults in their sample bought their first house when they were between 25 and 34 years old. Twenty-seven percent bought their first home before age 25, with 37 percent of household heads’ ages ranging from 25 - 34 and 13 percent of those aged 18-24 owned a home in 2016.

The data in the analysis also highlights the impact of earlier home purchases. Those who bought their first home between ages 25 and 34 have the greatest housing wealth by their sixties, with a median home equity around $150,000 at 60 or 61 years of age. The later the home purchase, the lower are the housing wealth, with home appreciation playing a huge role as years pass by. The median housing wealth of those who bought their first home at the age of  34 and those who waited until they turned 44 reflects a difference of $72,000. If they wait until they are 45 or older, the median wealth is more than $100,000 lower.

The report also found that those who bought their houses before turning 25 years old have a median home equity of $130,000. Interestingly,  the youngest buyers have lower incomes, are less educated, and buy lower-priced homes, with the median first-home value being less than $70,000. The median first-home value is around $125,000 for the other three groups.

It is worth noting that early home buyers can afford expensive homes and have fewer mortgage debts while in their sixties. Buyers aged 25 and below have lower median house value when they are older due to inadequate education, but have lower mortgage debt as they have owned their homes longer, with a median remaining principal at $11,000.

The report states that more young adults should take into account the long-term consequences of renting when homeownership is an option as they are failing to build housing wealth.