In the 1990s, I rarely had a first-time homebuyer over the age of 30.
But, by the end of last year, the average age of first-time homebuyers was 38, as this recent Darth Powell post illuminates.
The average age of all buyers was 56! And, I heard a podcaster say that the average age of first-time buyers currently is as high as 42!
This is an enormous problem because homeownership is a major aspect of the American Dream, and necessary for a stable society.
Homeownership fosters far more investment into a community; it allows young people to build wealth; it allows young people to stabilize their housing payments; and it encourages baby-making (as baby shortages are a huge problem in Western societies now).
Homeownership has been pushed out of reach for many reasons, including:
1. Inflation/Government Spending. Inflation pushes up home prices and interest rates.
2. High Rates. Today’s high rates are making homes unaffordable.
3. Artificially Low Rates. While extra low rates seem like gifts in the near term, they always have the effect of pushing home prices up.
4. Housing Subsidies. Whether it is favorable financing programs (FHA, VA, CRA, or any loan program with less than 10% down), down payment assistance programs, or housing grants, government subsidies always push housing prices up.
5. Supply Restrictions. Zoning restrictions, green mandates, and sky-high development fees severely restrict housing supply in many markets.
Solutions for First-Time Homebuyers:
1. Live in a teepee. Did you ever see a homeless Plains Indian in the 19th century? I didn’t think so. Even better, those things are mobile! Don’t like the climate? Run out of bison? Comanche keep attacking? Just move…
2. Move to Iowa. It has the lowest median home price of any state at $230,000. Sure, the winters are awful and you have to endure a bunch of liars running for President every four years…but the payment on a $230,000 home with 20% down will be under $1,200!
3. Become an AI expert and get a $200 million signing bonus! True story! Ruoming Pang just got a $200 million signing bonus when he left Apple for Meta. He could likely afford several homes, especially in Iowa!
4. Wait for Grandma to die (if she’s rich) (my grandma was not rich, so we preferred her alive).
5. Rob a bank. This used to be a low ROI proposition because bank robbers often make dumb mistakes. But, AI can now help make foolproof plans.
6. Win the lottery. Something we can all count on.
7. Marry a rich spouse. Pretty much failsafe.
8. Start an NGO. This worked amazingly well for years, but not so much lately.
9. Get on the subsidy bandwagon. Agriculture? Petroleum? Ethanol (my favorite)? Green energy? The GOP was supposed to shut these down… but they apparently forgot after November.
Other Ideas
10. Get A Co-Signer. First-time homebuyers should not let Mom and Dad spend all of their inheritance money! They should get them to co-sign and actually help make payments…
11. Down Payment Assistant Programs. There are over 2,500 down payment assistance programs across America. Homebuyers need to find a lender that is aware of all of them.
12. Gifts. Again, don’t let Mom and Dad spend your inheritance. Lenders are extremely flexible when it comes to gift money for home purchases. The key is getting a big one.
13. House Hacking. This is also known as slapping some renters in your home to help make your housing payments. And you don’t just have to buy two to four units. When my wife, Heejin, bought a home in the Rockridge section of Oakland in the 1990s, she rented out portions of the home to three UC Berkeley students, and they covered the entire housing payment.
14. Housing Grants. There are a surprisingly large number of housing grants available that just grant money outright to buyers. The Federal Home Loan Bank districts across the country, for example, offer very generous grants every year.
15. Rate Buydowns. Whether permanent or temporary, rate buydowns (with the help of lender or seller credits) can provide tremendous payment relief.
16. LLPA Waivers. First-time buyers need to remember too that they get artificially low rates from Fannie Mae and Freddie Mac because their rates are not impacted by loan-to-value ratios, credit scores and property types.
17. Buy In Special Census Tracts. Many lenders have extra low rates for homes in certain areas.
18. Low-Income Programs. Many lenders also offer very favorable financing for borrowers with lower incomes.
All this is to say that there are far more options for first-time homebuyers than most people realize.
The key of course is to find a savvy lender that can ensure no opportunity is missed.
