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Published: Mar 24, 2021 17 min read
Six scenes of young people buying houses.
Janice Chang for Money

Madina Gildenberg and her boyfriend relocated from Brooklyn to the Phoenix area in 2014 with the idea that it would be easier to one day buy a home there. Neither had a job when they moved, but they figured they could find work that paid almost as much as they might earn in New York, while the cost of living would be much lower.

By late 2020 Gildenberg had saved enough for a down payment and figured mortgage rates were as low as they would ever be. She was ready. The problem? Her boyfriend was not. He’d recently switched to a lower paying field and hadn’t made as much financial progress. She went ahead anyway, closing on a townhome in Tempe last month.

“I’m the owner. He is the boyfriend,” says Gildenberg, now 27. “This was an important mental switch I had to make. He can’t contribute much at all, so I had to stop waiting for him.”

Plenty of first-time homebuyers can surely relate to Gildenberg’s story. While young people want to own homes just as much as ever, achieving that dream in today’s economy often means re-setting traditional expectations, getting creative and making big financial sacrifices. For many, it means all of the above.

The odds can seem daunting: Last year, the share of first-time homebuyers hit the lowest point in over three-decades, and the median age of homebuyers recently hit 47 — up from the early 30s in the 1990s when most young people’s parents were first buying. At the same time, the number of people at prime starter home age keeps surging, while the number of properties on the market keeps shrinking.

Janice Chang for Money

“The traditional time to buy was when people got married and had kids and wanted to settle in one place, be in good school districts and have access to their job,” says Carol Galante, faculty director of Berkeley’s Terner Center for Housing Innovation.

That trajectory still exists, she says, but has become less dominant as people get married and have children later, if at all. Now, as the pandemic realigns how people work and live, shifts in when and how people buy “has even been accelerated.”

Today’s first-time homebuyers learned early on that they would need to do things differently than their parents and grandparents.

The average person now considering homeownership entered adulthood right around the Great Recession. That meant starting out in an uncertain job market, often while facing hefty student debt and surging rent prices. To make ends meet, people got comfortable doubling up, splitting houses six-ways and, yes, moving into their parents’ basements.

Now settled into their careers, this group has made progress financially. Those who've been lucky enough to stay employed during the past year have been able to save and pay down debt, making them stronger mortgage candidates. But just as the pandemic has made homeownership more desirable, it has also made it harder to attain.


According to real estate brokerage Redfin, the national median home sale price was $336,200 in February, a 14% increase from a year earlier. More than a third of homes sold above list price last month and Redfin says more than half of the offers placed by its agents faced competing bids for the 10th month in a row.

“We have to coach these first-time homebuyers initially and say to them, ‘the market is crazy right now. If you want to play the game that’s great, but this is what we are going to have to do to win,’” says Kathleen Martin, a real estate agent with Speicher Group of Long & Foster Real Estate in Bethesda, Md. “If you want a more traditional experience this is not your time.”

Ready to buy? Follow your finances, not your emotions

Gildenberg is hardly alone in upending the get-married, move-to-the-suburbs trope.

Unmarried couples buying together now account for one in six first-time homebuyers, up from one in 25 when the National Association of Realtors started tracking in the 1980s. Over the same period, married couples dropped from three-quarters of first-time buyers to just over half.

“Financially it makes more sense for people who want to cohabitate to buy,” says Martin. “The taboo of ‘we have to be married to buy’ is totally gone. Couples are finding rent makes no sense anymore. If their mortgage is going to be lower than the rent would be, why bother?”

In a sign of just how much the conversation around home buying is changing, Netflix recently launched a series called ‘Marriage or Mortgage' where a wedding planner and a real estate agent compete to convince engaged couples to part with their savings. “How do we pick between the day we deserve, and we want, and the future?” asks one groom or homeowner to-be.

For her part, Gildenberg got serious about saving for a home about two years ago when she noticed home prices starting to rise in the Phoenix area. She supported her boyfriend’s decision to take a lower paying job, but when it meant that he couldn’t save toward a down payment she decided to let go of the idea of buying together.

“I can do this myself,” she realized. "Homeownership was my project."

It helped that her career was flourishing. Soon after moving to Arizona, she got a job at a big tech company and has been promoted over the years.

She automatically deposited 20% of every paycheck into a savings account and didn’t touch her annual bonuses. She paid off credit card debt and an auto loan, putting the $400 a month she was no longer spending on car payments straight into savings. Not spending much during the pandemic helped too.

Her agents, who she met through real estate startup Opendoor, took her on a whirlwind tour of seven houses in two days. Immediately after touring, Gildenberg offered $270,000, asking price, for her three-bedroom, 2.5-bathroom home.

A natural skeptic, she says she couldn’t find anything to dislike about the place. It has good natural light, white tile floors that make it look larger and a short commute if she ever has to start going to the office again. She even has a small patio where she and her boyfriend look forward to eating dinner once they get around to buying patio furniture.

“I think if other women are able to just buy a house on their own and stop waiting for their boyfriends to catch up with them, it’s fine,” says Gildenberg. “You may still love them, but if they can’t pay, they can’t pay.”

Look where you can afford a house, not where you work or live

Scott Hatch and his wife Lani bought a house with friends.
Courtesy of Scott Hatch

Scott Hatch always wanted to own a home. But houses in Orange County, Calif., where he works as a construction inspector, were too expensive to seriously consider.

So Hatch hit upon an unusual solution. Last month, he and his wife Lani bought a $466,000 investment property with friends in Flagstaff, Ariz., a vacation town a seven hour drive from where they live. “I just wanted to put my money somewhere that I could go to and know it’s mine,” says Hatch, 35.

As big name cities have become increasingly out of reach for young buyers, more and more have been looking to cheaper regions. Like Hatch, some first-time homebuyers are taking the plunge with no plans to ever really live in the house they buy.

Roofstock, a marketplace for single-family rental properties, has seen a surge in buyers during the pandemic, many of them first-timers who rent in expensive cities deciding to invest in more affordable places.

Still more would-be homebuyers may be poised to take advantage of increasingly liberal work from home rules. Listing site Zillow estimates that nearly 2 million renters can’t afford to buy in their current locations, but work in industries where remote work is possible and also make enough money to afford starter homes somewhere else.

In fact, 800 of Zillow’s own employees have relocated since it announced they could work remotely indefinitely in October. More new-hires have also been from outside of the Seattle area, where it has its headquarters.

“The rise of remote work is really opening up a lot more options for people,” says Jeff Tucker, senior economist at Zillow. “Whether it is moving to a different metro area or to a more affordable distant suburb or exurb in their own metro area. If they don’t actually need to get downtown five days a week by 9 a.m. that could open up a lot of things in terms of homeownership.”

The Hatchs and their friends (including Lani’s sister and brother-in-law and another couple they all know from church) chose Flagstaff because they wanted a vacation spot no more than a day’s drive away. The mountain town is known for skiing and easy access to national parks.

They plan to rent out the three-bedroom, two-bath house on Airbnb for about $240 a night. At that rate, they’ll be able to cover the mortgage and utilities in just 12 nights a month. The goal is to use any extra earnings to buy another place next year.

Winning the home wasn’t easy. It was on the market for only four days, and they had to offer $21,000 over the asking price to beat out at least seven competing bids. Still, it ultimately cost them about half what a median priced house near where they work would.

For now, work is keeping the Hatchs tied to Southern California, but buying the place in Flagstaff may give them more options in the future. Occasionally they’ll visit, and if they like Flagstaff they could potentially move there one day.

“My parents own their home. Everyone I know owns their home," says Hatch. “We decided to do this house. Build some equity and then over the next couple years figure out where we actually want to be.”

Be ruthless with your lender

Julia Beals and her dog, moving to a new house.
Courtesy of Julia Beals

When Julia Beals and her husband Andrew bought their Lincoln, Calif. home in 2019 they mortgaged their $475,000 purchase at a 4.875% interest rate. Hoping rates would go down, they opted to wrap their mortgage insurance into the monthly payment.

The gamble paid off. In July 2020, the Beals refinanced their mortgage, cutting their rate to 2.875% and reducing their required monthly payment by $490.

Mortgage refinance had a banner year in 2020. As mortgage rates hit record lows after record low, 8.9 million borrowers took advantage. The way those millions refinanced, however, looked very different from the old image of walking into the bank on the corner and asking for their best offer.

The ability to compare lenders online has made it far easier to shop for the best rates and the growth of non-bank lenders in recent years has created more competition. And savvy borrowers know they have bargaining power. According to mortgage data provider Black Knight, eight in 10 refinancers switched to a new lender in the fourth quarter and lenders retained a record low share of borrowers after a refi.

Borrowers aren’t waiting long to cut their lender loose either: After rates first dropped below 3% last summer, the average borrower refinancing a mortgage had only held their loan for about 2.5 years. As rates continued sinking, a record share of refi activity was from borrowers who just took out their previous loan earlier in 2020. (In 2018, when the 30-year rate was near 5%, the average refinancer held their prior loan for more than seven years.)

The 24-year-old Beals is a real estate agent with Re/Max and says practically every buyer she has worked with in the last three years has refinanced their mortgage over the last 12 months. “It has significantly dropped their payment, or they can get rid of the mortgage insurance,” she says. “Or maybe it is time to refinance, pull some cash out and put it toward the remodel you’ve been wanting to do?”

For their part, Beals and her husband have been putting the savings toward their mortgage principal. If they keep making those extra payments, they will pay off their mortgage eight years ahead of schedule and save $70,000 in interest.

The notion of paying off your mortgage early is a popular one. Last summer, Google searches for “mortgage payoff” reached the highest point since 2004 and have been spiking again in 2021. An early payment scheme known as velocity banking, has caught fire on YouTube in recent years.

For a generation of young people who have long been wary of debt, this makes sense. “We were already used to paying that amount,” says Beals. “We just kept up with it and will pay off the loan quicker.”

What’s next for first time homebuyers?

The truth is, it’s tough out there for homebuyers. Even people with money for a down payment, stable employment and good credit scores are finding it difficult to get into homes.

According to the U.S. Census Bureau, there were 7% fewer houses for sale at the end of January 2021 than a year earlier. Buyers are feeling the difference. In some places, tales of homes receiving 30-plus offers are common. People make a half-dozen bids before winning a home, often spending more than planned.

Moreover, low mortgage rates and the ability to work from home do nothing for people who are out of work. They also don't solve the discrimination or financial inequality that still hold down Black homeownership rates. Experts say policy change is needed to meaningfully expand the pool of potential homebuyers.

The pandemic and low interest rates have helped people who “were on the edge already of being ready financially or being ready just emotionally to make that move,” says Berkley professor Galante. “The flip side is that for those who have been shut out of the system, or discriminated against within the system for a long time, it is actually now even harder.”

Gildenberg, the Beals and the Hatchs are success stories, but their flexibility also represents the path forward for a growing number of first-time homebuyers. Becoming a homeowner today may mean moving back home longer than planned, buying a house you’ve never seen or trying out an alternative to a plain vanilla mortgage — but it is possible.

“It’s just tough to get a mortgage today and it is hard to fit into that box,” says Adena Hefets, founder and CEO of Divvy Homes, a rent-to-own startup. “It is forcing people to be more creative than ever before.”

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