How Buying a Home Before You Turn 30 Is a ‘Wealth Multiplier’
Buying a home has long been a cornerstone strategy of building generational wealth, but new data shows just how much of an advantage first-time homebuyers get if they purchase early.
Americans who buy their first home by age 30 see a 22.5% boost to their net worth by the time they turn 50, compared to those who wait until their 40s, according to a report by Realtor.com released Thursday. The advantage — which the authors refer to as a “wealth multiplier” — translates to a higher net worth of $119,000 on average.
It all boils down to time in the market, experts say.
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“By gaining more years for appreciation and mortgage paydown, early homebuyers build a foundation of wealth that supports opportunities that cascade into the next generation,” Danielle Hale, chief economist at Realtor.com, said 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 perks of price appreciation. Not all of the so-called "wealth multiplier" comes from the home itself, however. The report also notes that owning a home provides a degree of financial stability that supports savings and investment elsewhere, which contributes to a higher net worth.
Age of first home purchase | Additional net worth by age 50 | Illustrative net worth increase (in dollars) |
|---|---|---|
28 to 32 | 22.5% | $119,000 |
33 to 37 | 11.2% | $59,000 |
38 to 42 | 1.5% | $8,000 |
43 to 52 | 0% | $0 |
Adam Hardy for Money; Realtor.com
The reality of buying a home at 30
For decades, buying a home at or before age 30 was the norm. These days, it’s the best-case scenario for most Americans.
According to the National Association of Realtors, or NAR, the median age of a first-time homebuyer is now 40. In the 1990s and through much of the 2000s, first-time buyers were usually in their early 30s.
Then the COVID-19 pandemic wrecked the housing market, pushing prices up almost overnight... and boxing out large swaths of younger buyers. They now face a much different homebuying reality than previous generations.
In 1990, the median home price was $96,800, while household income was $31,000, a price-to-income ratio of about 3-to-1, according to Realtor.com. Now home prices are at $418,000, and income is at $85,000, for a ratio of almost 5-to-1.
Separate research from Harvard University’s Joint Center for Housing Studies found that the price-to-income ratio for home buying hit an all-time high recently.
“With home prices so high relative to household incomes, would-be buyers need to save more and for longer to afford a down payment,” research analyst Peyton Whitney wrote in an October report for the group. “Down payments are already a significant barrier to homeownership, especially for first-time buyers, younger people, and households of color.”
Today it takes a typical family nearly 10 years to save enough for a down payment, while it took a little over three years to do so in the 1990s, according to the Realtor.com report.
"Homeownership has long been one of the most reliable ways families build and pass on wealth,” Damian Eales, CEO of Realtor.com, said in a statement. “Yet today, too many young people are stuck on the sidelines because buying a home has become increasingly out of reach.”
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