What Is The Average Age Of People Who Purchase Their First Property

Owning a home takes a huge financial commitment, and for many Americans, it is a symbolic achievement of the American Dream. However, with the cost of housing slowly rising, for many Americans achieving the American dream may well remain a dream. Rising mortgage rates have also impacted how first-time buyers are entering the market. An increasing number of first-time buyers are relying on family members to buy a home. According to a study conducted by the National Association of Realtors (NAR) in 2019, nearly a third of first-time homebuyers depended on a relative or friend to fund their down payment. It gets more interesting. The study also reveals that the number of first-time buyers that purchased with roommates increased to 4% from 2%.

Changing demographics of first-time homeowners

 These findings indicate that the demographics of first-time homebuyers is changing. In 2018, the average age of first-time homebuyers was 32 years old. This was an increase from the ’70s and ’80s when the average age was 29  . The rate of First-time homebuyers in comparison to total home buyers is declining. The NAR reports a 33% overall rate, falling from 34% the previous year. In fact, since 2010, the year that the tax credit for first-time homebuyers ended, the proportion of first-time homebuyers hasn’t exceeded 40% or higher.

Factors influencing average age for first-time homeowners

Various factors have been touted as the reason for the rise in the average age of first-time homeowners. Reasons such as the nationwide shortage of affordable housing, rising consumer debt and pending payments on student loans have made it more difficult for Americans to fund enough money for a down payment. According to the National Association of Realtors (NAR), the home affordability index spiked above 100 in January 2020, implying that finding an affordable house is getting beyond the reach of a family with a median income. 

Lending standards are also getting more stringent, making it more difficult to access loans. To reduce risk, banks tightened credit underwriting and double-downed on the 20% down payment rule for homebuyers. This has forced many people to postpone plans for purchasing their first houses.

More than 50% of first-time homebuyers below the age of 36 said, student debt delayed their home buying. According to data released by the Apartment List, while college grads without student debt needed 7.6 years to save for a 20% down payment in 2018, those with debt needed four more years.

As the average age of first-time buyers’ ages increased, so has their incomes. The average income of first-time purchasers rose to $93,200 in 2018 as a shortage of affordable options forced lower-income potential buyers out of the market. Social factors have also changed the demographics of homebuyers in recent years. Unmarried couples and those purchasing as roommates has risen, while the number of married couples buying homes for the first time has decreased. This may be explained by the fact that people are getting married at older ages than before. The average marriage age for women is 27.8 and 29.8 for men, according to 2018 figures from the U.S. Census Bureau. Life-changing events such as getting married or having kids are motivators to buying a home.

As expected, the real estate industry has also adapted to the socio-economic and demographic trends in demand. It is getting more challenging to get family-type houses than single apartments which are getting more expensive. As such, a lot of couples hoping to buy their first houses are being put on the waiting list as they search for a house that befits their status as family people. 

Millennials and Home Ownership

The demographic group significantly affected by the unfavourable housing market is the millennials. Many millennials have to overcome obstacles to homeownership which their parents didn’t experience such as college costs which seem to be growing faster than wages and an ever-mounting student loan balance. Plus, a lot of millennials are pushing their marriage to later dates, making them spend more extended periods with family rather than in their homes. 

However, despite these apparent challenges, many millennials are still striving to activate the American dream. According to the National Association of Realtors, millennials made up 36% of all first-time homebuyers in 2018. This makes them the single-largest buying group by generation. However, macroeconomic conditions earlier identified are preventing more millennials from owning their first homes. 

Summary

The average first-time homebuyer does appear to be getting older compared to prior years. Current economic conditions are squeezing out lower-income earners. Rising home prices, coupled with financial constraints such as student debt and down payments, are significant impediments to first-time homeownership. Social factors (such as people getting married at older ages) are also triggering changes in first-time homeownership. All these indicate that getting a home for the first-time is getting more difficult. As such, we expect that there would be an increase in the average age of first-time home purchasers in the future.