It’s easy to scroll through social media and feel a pang of envy when you see peers buying homes, especially in prime locations like the Bay Area. But, if you’re a millennial feeling down about not yet owning property there, let’s discuss why you shouldn’t feel bad and what you can do about it.
First, did you know that in 2022, the average age of the first-time homebuyer was 36? Just a year earlier, it was 33. Affording a home in today’s climate is difficult, and it’s made exponentially harder by the Bay Area’s record-breaking prices.
We can’t spend time pining over unaffordable homes or feeling unsuccessful because we haven’t achieved the “American Dream.” It takes time, and current interest rates have forced many buyers out of the market.
Understanding the Shift in Housing Affordability
Recent economic trends have made homeownership increasingly elusive, especially for younger generations.
Historically, the Bay Area has always been pricey, but recent years have seen an unprecedented surge in housing prices. Combine this with the fact that average incomes haven’t risen at the same pace as housing prices, and you have a recipe for affordability challenges. Next steps in inflation and the Federal Reserve’s relentless actions at bringing it under control.
The U.S. housing affordability index now sits lower than it was during the Great Recession, and it’s nearly as low as the early 1980s when interest rates took. This means that even if you’re earning a decent salary, it’s harder than ever to afford a home in many parts of the country, especially in places like the Bay Area.
Buying a house is challenging even for those already in the housing market, let alone those looking for their first home.
Actionable Strategies for Aspiring Homeowners
If your heart is set on owning a piece of property, there are actionable strategies you can employ to inch closer to your dream:
- Budget & Save
- Understand your financial health. Establish a budget, cut unnecessary expenses, and prioritize saving a sizeable down payment.
- Build Credit
- A higher credit score can help you secure better mortgage rates, potentially saving you thousands over the life of a loan.
- Explore First-time Homebuyer Programs
- See if you qualify for any that can help with down payments and interest rates.
- Stay Informed
- Keep an eye on the housing market, interest rates, and local policies that might affect home prices.
Think Outside the Box: Investing in Rental Properties
There may be a more affordable way of getting into the housing market, but it requires a little bit of creativity. Have you ever considered becoming a landlord?
Get your foot in the door of the housing market by purchasing cheaper properties while renting in the area you love.
Some benefits of investing in a rental property include:
- Let your tenant pay the mortgage.
- Build equity as the mortgage gets paid down.
- Tax benefits from operating expenses and property taxes.
- Future flexibility to either move into your rental property or sell and use the proceeds to purchase your home.
When You’re Ready, I am Here to be Your Guide
Not owning a home in the Bay Area right now doesn’t define your success or your future prospects. When the time is right, you’ll know. Remember, every journey to homeownership is unique. Until then, stay informed and stay positive. When you’re ready, I’m here to be your guide to homeownership.