The Biggest Mistake Millenials Are Making
Homeownership among millennials is considerably lower than previous generations at the same age. However, many of today’s millennials have much higher student loan debts. Faced with a shortage of inventory and higher home prices, some are still understandably hesitant to jump into homeownership.
There is good news though, millennials today can obtain mortgage rates far below what their parents and grandparents paid. In addition to the low rates, lenders today are offering competitive programs and requiring down payments as low as 3%.
For instance, Keller Mortgage came onto the scene early this year offering no lender fees, saving homebuyers a minimum of $4000. They also offer $1000 towards closing costs for purchases of $250K or more and quick pre-approval process.
Millionaire Investment Advice
Whenever a well-respected millionaire gives investment advice, listeners usually clamor to hear it. This millionaire shares some simple and straightforward insights: “The fact is, you aren’t really in the game of building wealth until you own some real estate.”
David Bach is a self-made millionaire who has written nine consecutive New York Times bestsellers. His book, “The Automatic Millionaire,” spent 31 weeks on the New York Times bestseller list.
He is one of the only business authors in history to have four books simultaneously on the New York Times, Wall Street Journal, BusinessWeek, and USA Today bestseller lists.
He has been a contributor to NBC’s Today Show, appearing more than 100 times, as well as a regular on ABC, CBS, Fox, CNBC, CNN, Yahoo, The View, and PBS. He has also been profiled in many major publications, including the New York Times, BusinessWeek, USA Today, People, Reader’s Digest, Time, Financial Times, Washington Post, Wall Street Journal, Working Woman, Glamour, Family Circle, Redbook, Huffington Post, Business Insider, Investors’ Business Daily, and Forbes.
In regards to wealth building, David Bach makes a striking statement:
“Not prioritizing homeownership is the single biggest mistake millennials are making.”
He further stated, “Buying a home is an escalator to wealth.”
Young adults in particular aren’t hopping on this escalator, and it’s a costly mistake…If millennials don’t buy a home, their chances of actually having any wealth in this country are little to none.”
He then elaborates on the game of homeownership:
“Start by crunching the numbers…actually do the math…This way, you’re really clear on your goals and you won’t just say to yourself, ‘I’ll never afford this!’A good rule of thumb is to make sure your total monthly housing payment doesn’t consume more than 30 percent of your take-home pay.”
A Zillow survey of 10,000 homeowners revealed that 81% of new homeowners had one common regret and that it was related to their mortgage.
Part of the problem lies in the fact that first-time homebuyers don’t take enough time to shop lenders. Perhaps it’s inexperience, but they simply are not familiar with their lending options nor do they know what questions to ask. In the end, nearly all of the first-time homeowners were happy with their purchase.
A Case For Homeownership
According to a non-profit institute study conducted by Urban Institute surveyed adults who purchased their first home during the ages of 25-34 years of age. The study showed that today’s seniors became homeowners at a younger age.
Those who bought their homes at before 25, had only $10,000 left on their mortgage at age 60. Compared to buyers who waited until their late twenties and early thirties with mortgage balances of $50,000 on more expensive properties. This study provides strong evidence as to why millennials should purchase their first-home now rather than renew their leases.
“Today’s young adults are failing to build housing wealth, the largest single source of wealth, at the same rate as previous generations. While people make the choice to own or rent that suits them at a given point, maybe more young adults should take into account the long-term consequences of renting when homeownership is an option.” – Urban Institute
Considering that retirees rely more on accumulated wealth than income, building one’s wealth early on can be achieved with the purchase of real estate.
Many experts are concerned that the longer millennials wait to purchase a home, the greater their chances of long-term debt well into their retirement years. As such, they will not have accumulated sufficient wealth to sustain them through their twilight years.
Real estate remains one of the safest long-term investments today. In the end, the purchase of a home is not as expensive as it might seem. Not to mention that everyone needs to live somewhere, so why pay down someone else’s mortgage in the form of rent, when you could pay towards ownership of your own private home.
Have you forestalled plans to purchase a home? Wondering if now is the right time to buy? Feel free to leave your questions and comments below for the benefit of others here.