This past Sunday, I learned from a friend at church that her 20-year-old son just bought a house down the street from our home in Fountain, Minn. She was asking me who we used for Internet service in town, so she could mention it to him.
I couldn’t believe that this young man was already old enough to purchase a home, because I remember when I was his Sunday school teacher back when he was in fifth grade. Now he owned a home down the street from me, while working as an electrician for a locally-owned company.
This was another moment that made me feel old. I seem to experience those more and more.
But, I was really happy and excited for him. I love to see young people taking that leap into home ownership. They are investing in something that they can use to build equity. It shows that they are grounded and they will get a head start in life by making that investment at such a young age.
I bought my first home when I was 21. I remember looking at apartments and the cost of renting a one bedroom unit was between $400 and $600 per month in Rochester, Minn., back in 1994. I ended up buying a home for $57,750. I remember thinking I could never afford to buy a home, because I thought I needed to have a whole bunch of money to put down on a house. I vaguely recall only needing about $1,700 to put down on the house as part of a first time home buyer program. My house payment was only $325 per month for a three bedroom and two bathroom townhome in northwest Rochester.
Luck was on my side. In 1999, when I accepted a promotion that resulted in an out-of-state job transfer, I sold my house for $86,000. In five years, my house increased in value by 48.9% and resulted in a net gain of $28,250. I bought my home during a buyer’s market and sold it in a seller’s market. It doesn’t always work out that way, but it was a great start.
Since buying my first home, I have always felt that real estate was a great investment, tremendously outperforming the stock market.
So, when I hear about young people buying homes, it’s encouraging. It’s a sign that our next generation is feeling confident in their future.
I was curious what the rest of the Internet had to say about young people buying homes these days, and there were plenty of news stories.
There was a July 24, 2019, article published by USA Today that was titled “How to buy a home, millennial style.”
That article, like many I found on the Internet, pointed out that millennials are very conservative homebuyers.
“Many young households ‘learned a lesson’ from the drop in home prices a decade ago, says Doug Duncan, chief economist of Fannie Mae. ‘They’re being conservative.’”
Just how conservative? “The share of frugal young homebuyers staying under the 30% income-to-housing costs threshold was just 54% during the tail end of the housing boom in 2006 and has climbed steadily since. It has been roughly flat at about 75% since 2013. That’s despite a strengthening labor market and faster wage growth, and lending standards that increasingly eased starting in 2014 before leveling off the past couple of years.”
It sounds like many of these young homebuyers have learned from The Great Recession about how to avoid over-extending themselves. They don’t want to become “house poor.” Very smart, these young people are (Baby Yoda say, he would).
It sounds like something straight out of the book Rich Dad Poor Dad, by authors Robert Kiyosaki and Sharon Lechter.
I have plugged this book in the past, and this subject warrants a reminder.
“Young people value other things, like experiences, above owning a home. More Americans in their 20s and 30s (56% to 79%) cited good health, financial security, leisure time and a happy marriage than home ownership (56% to 61%) as factors contributing to a good life, according to a 2017 survey by market research firm Gfk Global,” shared in this USA Today article.
And, I should mention that this 20-year-old “kid” who just bought a house down the street from us is not alone. Our neighborhoods in Fountain are turning over to a younger generation. There’s another 20-something young couple who just bought another house in our neighborhood. A co-worker also told me that her daughter, who is 26 years old, is buying a home, planning to close on this property in the next couple months.
We need to see this happen. They are not just investing in a home. They are investing in the American Dream. They are investing in their future, and ours as a nation.
As 75% of the assets of the nation are gradually transferring into the hands of the baby boomer generation, we have to keep in mind that the millennials will be in that same driver’s seat some day.
Home ownership at a young age will help them learn many things quickly. Taxes. Insurance. Utilities. Maintenance. Equity. Just to name a few.
Most importantly: pride of ownership.
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