Nothing gives one a sense of independence and security quite like buying a home. —Debra Kroon, a Realtor with Yosemite West Real Estate in Oakhurst, Calif.
Staci Striegnitz was 24 when she bought her first home in a central Denver neighborhood back in 2010.
She took the real-estate plunge partly because she worked at a real estate company called Homefinder (now 8z.com, where she still works in marketing).
"It was not quite as intimidating," she says. "So I started punching around numbers and a lender prequalified me. I thought, 'Maybe this can really come true.’ ”
But maybe the biggest reason she bought a home was that she felt prepared to buy one. She had the job — and she had a down payment. With the recovering economy, Striegnitz did a lot of things correct. Other 20-somethings, however, are struggling with student loan debt and may wonder how and when they will be able to afford buying their own place.
The most recent National Association of Realtors Profile of Home Buyers and Sellers says the median age of first-time buyers is 31 with a median income of $61,800. Most of these buyers purchase a 1,600-square-foot home at an average price of about $154,000.
Striegnitz's home was built in the 1940s and had two bedrooms and one bathroom.
"I was really first of all my friends to buy a home," she says, "but pretty soon other friends started looking."
A few of her friends also bought in 2010. By now, more than half of her friends have homes.
A good time
Scott Lalli thinks it is a great time to buy a home.
"Right now is one of the best times in history for affordability," says Lalli, vice president of sales and marketing for Destination Homes in Layton, Utah.
He refers to low interest rates and the fact that many people can own a home for less than rent.
"I always think housing is a wise investment," he says. "We've been through a little bit of a downturn where people have taken it on the chin a little bit with housing, but historically it has always been a wise investment and where 20-somethings have awhile to work and invest, they have to have a place to live."
Lalli teaches a continuing education class for real estate agents on the differences between different ages of buyers. He says 20-somethings are looking for community-orientated locations. "They are socially conscious," he says, "and lifestyle is important to them."
People in that age group are involved in many things in their lives and want their homes to go along with that flexibility.
They don't, however, want to spend a lot of time on large yards or maintenance, Lallis says.
Efficiency and being environmentally sound are also important values they look at.
Although Lalli is enthusiastic about getting people into homes, he also says it is important to not overextend yourself financially. "If you are feeling all you can do is make your house payment," he says, "that is when people get into trouble."
To stay out of trouble, first-time buyers need to look carefully at their finances, employment and long-term plans, experts say.
Gene Natali in Pittsburgh, co-author of "The Missing Semester: Your financial choices have consequences. Will you choose wisely?" says people need to assess whether they can afford the home.
"If you can't afford to put 20 percent down," he says, "you can't afford a house."
Lalli may disagree with that, and FHA loans don't require that much down, but Natali holds firm on his position — particularly when considering all the other costs of a home.
"No one ever says the cost of a home is more than a mortgage," he says.
Patrick Ruffner, national relocation manager for Guaranteed Rate in Chicago, says in an email that homeowners often consider their future mortgage payment. "But there are many costs of homeownership a buyer must take into consideration in addition to the mortgage," he says. "These include annual property taxes, homeowner's insurance, utilities and upkeep of the home."
Natali says his first home's water heater went out that first year. "I had no idea how much they cost," he says.
So he says people should not take the highest mortgage amount they qualify for as their purchasing target but to shoot lower to give some financial room to maneuver.
Striegnitz was able to put 20 percent down on her home for two reasons. One, her parents helped pay for her education, allowing her to graduate from college without a lot of student debt. John P. Evans, a sales associate at Gloria Nilson & Co. Real Estate in Pt. Pleasant Beach, N.J., says in an email that student loan debt is causing some 20-somethings to delay buying a home. "Not just the monthly payments but many have defaulted and hurt their credit," he says, "so they are taking longer in making the decision to buy a home until they get themselves to a better position financially."
The other reason Striegnitz had the money for the down payment is she saved for it.
"I saved religiously ever since I was a kid," she says.
When she got her first job out of college, she lived as if she were still tight on money and put the rest away. This enabled her to have a low payment — and now that she has purchased a second home, having put down 20 percent on the first home enables her now to rent it out at a good profit.
Another thing to consider is stability. Ruffner says people shouldn't buy a home if they are planning on moving within two to three years. "If your company has a history of relocating people," he says, "or you plan to make a change in location in the near future, buying may not be your best option."
Lalli says uncertainty is part of being in your 20s. "When you are older you have a little clearer vision of how the future looks and how long you will be somewhere," he says.
In their 20s, people may have the uncertainty of possible marriage, whether or not they will have children and how will their career shape up. The older a person gets, the more factors they have to consider, Lalli says.
Debra Kroon, a Realtor with Yosemite West Real Estate in Oakhurst, Calif., says buying a home creates stability. "Nothing gives one a sense of independence and security quite like buying a home," she says in an email.
"The home could be seen as permanent," she says, "but could be only for 10 years. Or is this a stepping stone toward a different home following a major life event?"
Natali says homeownership is still a token of the American Dream for most people — but that from the 20-somethings he interacts with, they don't think of homes primarily as a status symbol. "They are a pretty practical generation," he says.