Avoid 4. Resolve 6. Be Happy
In my mid-twenties I planned to own a home by age 30. I did, creatively. By age 35 I owned four homes, creatively. I lived in one and rented out the other three. I was not a good saver so owning a home, before becoming an adequate saver, helped me to avoid what is outlined in numbers 1-4 below.
- Only 14%
Of American Workers only 14% are confident they have enough money to live comfortably in retirement (Employee Benefit Research Institute – EBRI).
- No savings:
Of those aged 50-64, 25% have no savings (USA Today).
3. Less than $25,000
Of those workers surveyed, 60% report that their total household savings and investments (excluding defined benefit pensions) is less than $25,000 (ERBI).
4. A do over? (This isn’t Groundhogs Day)
Of those surveyed, 75% say they have not saved enough and would save more if they could do it all over again (Health and Retirement Study).
What Gives?
The goal to own isn’t that strong today for those aged 25-40. The U.S. Census confirms this. The number of people in Southeastern Wisconsin – age 25-40 – who own a home is down from 58,000 in 2005 to 48,000 today. Many factors are at play in the decrease of home ownership. Among them:
- Uncertainty
When I talk to young people they tell me that they have never known anything but a bad real estate climate;
6. Student debt
The average debt for two-thirds of recent graduates with a B.A. is $27,000;
- Job Market
The job market is improving (this plays a role with uncertainty) but it remains difficult for younger people to find that first job – consequently they work two jobs to make ends meet – while living and paying off student debt.
8. Cash on hand
Many young workers simply don’t have the down payment needed to buy a home.
9. Mobility
What if the job market takes you to another part of the country?
10. Sharing economy
We may be at the start of an access not ownership society – using vs. owning.
What does it mean?
Numbers 5-10 are reasonable concerns. Numbers 1-4, in many instances, are consequences of unreasonable expectations. If I were a Millennial I’d have concerns but I’d have the curiosity to make sure I wasn’t missing information that would allow me to make an informed choice, buy a home and create a future with adequate finances. Be creative.
I’ll not pretend that everyone should own a home but I believe that if you want to own a home you should investigate your options – how best to buy, where to buy and who works for whom in the real estate process.
If you are considering buying a home and find it daunting – put the smart phone down. Remember, (see our last newsletter) the information being pushed to you by the real estate “crack” sites is not really information to inform, it is information to sell. Take a deep breath.
Why am I a proponent of home ownership? The obvious reasons are affordability and historically low interest rates. In the most simple of terms, owning a home is a forced savings account (see numbers 1-4). Home ownership, in conjunction with investing, could help those in the 25-40 year old age bracket avoid what so many Boomers are feeling today.
Call Seamus or me and arrange to talk over a cup of coffee. Yes, coffee. Sometimes the slower paced old fashioned methods actually work.