The median homebuyer age in America is getting older and older each year. Recently, higher home prices and higher mortgage rates aren’t help.
With the goal of increasing our asset-to-liability ratio to 5:1 or greater by the time we retire, buying a home too late may pose problems. Let’s do a little digging into why buying a home at a later age may not be ideal.
The median age of first-time homebuyers is now 33. This is the oldest age on record dating back to 1981, according to the National Association of Realtors. Back in 1981, the median age of first-time homebuyers was between 28-29.
It’s clear the rising cost of homes, the rapid increase in college tuition, and the delay in household formation all have something to do with the first-time homebuyer age ticking up. Thankfully, we’re all living a little bit longer as well.
The median age of first-time homers increasing by ~14% since 1981 is interesting. However, what’s even more interesting is the fact the median age of all homebuyers is now 47. This is a 51% increase over the median age of 31 in 1981. What’s going on here?
Why The Median Homebuyer Age Is Getting Older
Here’s the chart that illustrates the median age of all buyers, first-time buyers, and repeat buyers in 2019. It gives us a clue as to why the median age of all home buyers has increased so dramatically.
The median age of all real estate buyers is roughly 47. For first-time homebuyers, the median age 33. The median age for repeat real estate buyers is about 55 years old.
Main Reason For Older Buyers
The main driver of the huge increase in the median age of all home buyers is due to the rapid increase in the age of the repeat buyer. In 2019, 55 was the median age for a repeat buyer compared to around 41 in 1981.
We know that the average U.S. homeownership tenure is roughly 10 years, up from just 3.7 years in 2004 during the go-go days. Therefore, one might guess that the median age for the typical second-time home buyer is roughly 42 (33 + 9).
Given the median age of the repeat buyer is around 55, this means there are simply more 55+-year-old repeat buyers than 42-year-old repeat buyers.
Perhaps by the time you are 55 years old, you’re on to your third, fourth, or fifth house already. At 55 years old, your wealth has probably accelerated more quickly than a 45-year-old given you likely have more investments.
Further, given we are wealthier and living longer, perhaps more people in their 50s are deciding to upgrade their homes and live it up more.
Investing In Real Estate As A Retirement Strategy
My main assumption for the dramatic age increase for repeat buyers is that since 1981, more Americans are buying more properties for investment and passive income purposes. No longer is a home just a place to live. Real estate has become a highly popular way for people to create wealth.
Instead of just buying a primary residence to live in for the rest of your life, people are buying rental properties to generate valuable cash flow. With interest rates near all-time lows, the value of rental income has gone up. It now takes a lot more capital to generate the same amount of risk-adjust income.
No wonder why demand for real estate is so high and will likely stay high for years after the pandemic. Inventory is declining, rates are staying low, and people are much wealthier.
A Curious New Median Age Homebuyer Chart
Here is another chart that shows the median age of all homebuyers by Deutsche Bank. It has continuously increased since this data was first recorded. Thankfully, we’re all living longer. However, biologically, it’s still much harder to have a baby after 35-40.
Why I Bought Multiple Properties
Most of the people I know own more than one property. But I’m 45 years old and have many friends who are in their late 40s and 50s. Even my grandparents owned a primary residence and some farmland with a modest home.
I bought my first home at 26, second home at 28, third home at 30 (mistake), fourth home at 37, sold my second home at 40, and bought a forever home at age 43 in mid-2020.
It was just too tempting not to buy when mortgage rates were so low. Further, I was able to get a better deal during the beginning of the pandemic. With the stock market also doing so well, using profits to live a better life makes sense.
65% of the reason why I wanted to buy my first home was that I no longer wanted to live in a one-bedroom apartment. At the time, I was living with my girlfriend in a noisy building. The upstairs neighbor was a loud drunk and the place leaked whenever it rained heavily. Rent felt loving throwing money away.
The remaining 35% of the reason was that I felt there was a lot of upside pricing potential in owning the property. I had come from Manhattan where owning a 2/2 with a full-on park view condo for less than $600,000 was unheard of.
This 65% / 35% ratio of wanting to live a better life and expecting upside pricing potential has been pretty consistent throughout my entire home buying experience. I just love living in a nice place given I spend about half my time at home.
Investing In Real Estate More Strategically
It was only until I invested a significant amount of money in real estate crowdfunding starting in 2016 that I shifted the reason for buying ratio to 100% focused on returns. After all, if I couldn’t enjoy my investments, then I sure as heck hoped they made a profit.
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Generational Wealth With Real Estate
Several friends are buying multiple properties in their neighborhoods to form a cluster of properties for their immediate family. The older I get, the more I think about doing the same.
Of course, we won’t know whether our children will actually end up living close by until we are older. But I think it is the dream of many parents to want to be involved throughout their children’s lives.
Imagine how we’d feel as our children near the median first-time home-buying age. Surely, many of us will have wished we had bought them a property 33 years ago.
For example, a $1 million home today would be worth $5 million in 33 years at a 5% compound annual growth rate. Yikes. Good luck buying in the future kids!
It’s incumbent on parents to recognize opportunity and buy real estate today. You know your kids, 25 years from now, will wonder why you didn’t buy more real estate at today’s prices. In 25 years, the median homebuyer age will likely be 3-5 years old.
Percentage Of Americans Who Are Homeowners
The latest data shows that the percentage of Americans who own homes continues to tick up. The percentage is now at about 65% from a low of about 63% in 2016. As the median homebuyer age gets older, it will be interesting to see the homeownership percentage change.
My guess is that the percentage of Americans who own homes will continue to increase as the millennial generation continues to seek homeownership. Millennials make up around 38% of all homebuyers today.
By 2035, my guess is that the percentage of Americans who own homes will increase to 70%.
Generational Homeownership Rates
Today the millennial homeownership rate is 43 percent. This is well below the rates of generation X (67 percent) and the baby boomer and silent generations (77 percent). As millennials grow older, the percentage homeownership rate will increase.
As the millennial generation homeownership rate continues to increase, so will the overall percentage of Americans who own homes. It seems likely all generational homeownership rates will end up in the mid-70% and stay there. By then, however, a new generation will be coming up and bring the average back down.
I expect most home equity to remain within families as homes are passed down from generation-to-generation. As generations inherit homes and buy their own homes, more households will own multiple homes.
The median age for first-time home buyers may continue to increase given real estate prices continue to beat wage inflation.
As for repeat buyers, I’ve spoken to many people in their 50s and 60s and all of them are spending more money to live it up while they still have the chance. The pandemic has really made people question the point of saving and investing so much.
Given we are also living longer and getting wealthier, the median age of repeat homebuyers will likely continue to increase as well.
Shoot To Own Your Primary Residence By 30
Now that you know the median homebuyer age for first-time and repeat buyers is 33 and 55, respectively, it’s worth trying to buy your first property by age 30. After all, your goal is to outperform the median and average person so you can achieve financial independence sooner.
Remember, the median American is not in great financial shape. However, the average American is technically a millionaire in their 60s. But your goal is to be a multi-millionaire given inflation robs us of our purchasing power.
The sooner you can settle down in your career and find a place you think you will enjoy living in for 10 years, the sooner you can get neutral real estate. Further, the sooner you buy your property, the sooner you can pay off your mortgage. Depending on your assets, it may be difficult to qualify for a mortgage the older you get.
If you can’t buy your first property by age 30 using my 30/30/3 home buying rule, then do so as soon as you can. If bought responsibly, homeownership is one of the best ways the typical person can build wealth.
When you look back on your life, you’re not going to savor all the money you saved living in a cheap place. Instead, you’re going to cherish all the memories you had in a nicer home. Of course, you can always rent a nice place and invest your money elsewhere. But I think it’s best to do both.
Real Estate Recommendations
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2) Shop around for a mortgage.
Check the latest mortgage rates online. When lenders compete, you win. Rates are ticking up again due to higher inflation expectations. But they are still low by historical standards. Get as many free quotes as you can to get the lowest mortgage rate possible.
The Median Homebuyer Age is a Financial Samurai original post. If you want to achieve financial freedom sooner and be a better real estate investor, pick up a hard copy of my new book, Buy This, Not That: How To Spend Your Way To Wealth And Freedom. It will be the best personal finance book you’ll ever read.
I currently live in San Francisco and work in finance. I’m in my mid-late twenties (trying to remain anonymous) and have about $375K saved for a down payment on a place (my other investments have done quite well). I’ve found a few places (2 bed/2 bath) with beautiful ocean views (a must for me) that largely satisfy the 30/30/30 rule, that I’d like to offer on.
I love the Bay Area, particularly the North Bay, and always want to have some degree of roots here. However, I don’t have plans to live here for the next 10 years – I have a strong desire to live in multiple cities before settling down. I will likely work in SF for another year, move and rent a 1 bedroom in NYC for a couple years after, and then move and buy a primary residence in LA thereafter.
My question is should I buy in the SF Bay Area right now, knowing that I will only be living in it for a year, but also knowing I want to hold it forever? I would love to keep it as a pied-a-terre/vacation/rental property for the future. I make good money and fully expect to 1) be able to rent the Bay Area condo out for the same as the mortgage/prop tax/maintenance cost, and 2) fully expect to have enough saved by the time I move to LA to buy a new primary residence without having to sell my Bay Area property.
This may be a bit more of a unique situation since it is strange to buy something in one city only to move to a new city and then rent again, but I have no desire to buy something in NYC, and so then the thought of renting in SF and NYC over the next 3 or more years while this buying opportunity exists just seems negligent.
First time buyers are older now because wages haven’t kept up with the rising cost of housing, plus the addition of student loan debt.
Good luck graduating college with 6 figures in debt and having a job that will afford you to buy a house any time soon.
If the median for returning buys is 55, then 50% of all return buyers are older than 55. I believe this has to do with the downsizing that often happens when people retire or the kids all move out of the house for good. This can happen around 65, especially as the age of people having increases.
I think you are likely spot on with the assessment, the housing shortage is driven by those with money buying investment properties, which could have gone to first time home buyers. It is likely that buy and hold mentality that forces others out. Other major factors include increase in college tuition and stagnation of job entry level wages/salaries as well.
I think another factor could be expectation versus reality for first time home buyers. I tend to think that younger generations that have had the luxury of growing up in their parents houses tend to expect the same level of comfort upon graduation. I think some people are likely discounting the sacrifices made by previous generations, and the level of effort required to move from a small ranch, or SFH up to their dream homes, etc. Similar to some of the comments above, where people traded up overtime. I think that some first time home buyers, are reluctant to purchase when they are younger, simply because the value isn’t there for them. Just like how FS elected not to spend over $600k, on a small condo in NYC all those years ago. The idea of spending so much money for something so small can be hard. However, those of us with more experience and the luxury of the rear view mirror see missed opportunity.
Just imagine if you had bought that $600k unit, and now (pre-covid anyway) could have sold it for over $2M+. Not a bad return over 10 years.
I also think the deck is stacked against the younger generation, especially with the increase in college tuition among other things. So, I don’t necessarily think the desire to purchase has decreased, but the expectations have grown along with the price of homes.
her every cent counts says
Welp I’ll be 37 this Nov so I guess I missed the “buy your primary residence by 30” cutoff.
I’m still not sure I’m old enough to buy!
I’m looking at a $1.6M home in the Bay Area. I have the down payment, emergency fund… total $1.6M networth, give or take. I still feel like I don’t have enough to buy!
Are you trying to avoid a mortgage or you dont have steady income? 1.6 mil NW should easily put you in a great position to put a substantial amount down with a cheap mortgage for a 1.6mil home.
Great article, thanks Sam!
Definitely interesting that the average age of first time buyers & median house buyers is increasing.
I think a large portion of this is due to access to capital. It’s becoming a lot easier for people borrow money until they’re 70 or even later, meaning people are able to buy in their 50s and 60s that previously would have been stuck in their current property unless they had the cash to buy outright.
Also as you’ve mentioned, as properties are increasing in price, it’s becoming even harder for first time buyers. Here in the UK it’s becoming practically impossible to buy a property unless you have a 15% deposit, so can imagine this trend is only set to continue!
Jack @ Turtle PF says
We purchased our first property at 27 (3 years ago) and plan to live here for another 5 years. We also purchased two additional investment properties recently. We thought about upgrading our primary residence but we fairly happy with current location and is allowing us to save a decent amount of $ (housing is about 15% of our gross income).
Didn’t buy a home until we were married for over 8 years as we were in school and my husband was a physician in residency training. So we were 31 and 33. Still in same home over 30 years later and it has only appreciated in the past 5 years. If we sold now would break even because we made many capital improvements ( bathrooms and kitchen). We never felt need to upgrade to nicer neighborhood and probably have a higher net worth than most of our neighbors. Stealth wealth.
How would you really know considering they may be practicing stealth wealth as well?
Real Estate is a great wealth building assets, however between taxes, insurance, and maintenance sometimes I wonder, appreciation for a very long period of time is awesome. I had bought property in 1988 and 2005 for 10 year after purchased appreciation was very slow.
Insightful article, Sam. Thanks. My wife and I bought our first home in 1999 at 24. Sold it and applied the equity to buy our second home two years later. From there, we traded up two more my times, at roughly 2 year intervals landing in our current home which we’ve been in for almost 16 years. We used our equity to trade up on our homes, and finance the start up of my business in 2003. We also used some equity to begin our rental home portfolio about a decade ago. Last month, we were under contract to sell our current home and trade up to our dream home but some irreconcilable issues came up on the dream home inspection so we are still on the hunt.
I think we we will continue to see the medium age of first time homebuyers continue to get older. My rental homes were purchased with the goal of leaving them to each of my daughters. Hopefully, we can deploy some of the value (cash flow or equity) of the rentals to assist with first home purchases.
Oh wow so many fascinating insights. Im especially intrigued in the multiple home buyer stats. Makes sense given wealth stats and wanting to upgrade later in life.
The median age of the first time homebuyer at 33 is much older than I would have guessed! Makes me feel very fortunate to have bought when I did 10+ years ago.
Sam, Thanks for another well thought out post. My wife and I bought our first (current) home 2.5 years ago. I was 32 and my wife 30. Our monthly payment on a 15 year fixed is ~21%(including taxes and insurance): rule one check. We put 30% down: rule two check. Finally the total amount mortgaged at the time was about double our annual income: rule 3 check. It’s refreshing to read a personal finance site that encourages home ownership, as some that I’ve read discourage it.
Bought my first house at 24, still in it 40 years later. I’m sitting on my patio looking into the 800 acres of wooded wetlands behind my house. It would be hard to leave here. I can’t fathom what changing jobs, neighborhoods and cities must be like. The economics of housing never meant anything to me, just kept my housing costs to 10-12 % of my income starting out and let them drop over time as my income increased, of course they are only a couple percent of mine now in retirement with a paid for house. Taxes, utilities and insurance are negligible in this locale. But this is not a great place to invest in property, we’ve got a shrinking population and just lost a major employer of upper class execs. My four bed, four bathroom 3,000 sq ft house is probably not even worth 200K. Doesn’t matter though, that’s not a material amount of cash anyway. Two of my three millenial kids bought houses in their late twenties, one is still renting at 29.
I’d say you got way more than 200k worth of life and enjoyment out of that home!
I agree with much of your article except for appreciation. This varies greatly between the coasts and the heartland. My parents bought their second home in the Cincinnati suburbs for $28,000 in 1966. Today that same home in what is a good neighborhood is worth no more than $200,000. This would be true for many heartland cities. Obviously this is nowhere near 5% annual appreciation. As a rental I agree this would be a good deal. To be honest it amazes me how much of a difference there is in appreciation from one region to another.
It’s a 3.7 percent yearly increase, which is not horrible.
Which is near 5% lol…
Lifestyle choice aside, is there any financial case to be made for owning a second home that you split your time between without renting out? Or does this only make sense if you’re willing to rent out the vacation home while you’re not in it?
Sure if you can afford it
Perhaps very one should wait until retirement to buy their first home. And just do a 7 year mortgage. They can pay this off quicker than what I am sure will be 10 year car loans by then!
I was 24 when I bought my first home. Then I had to move for my career and now it is a rental. I’ve been able to gain a lot of equity since my purchase in 2017.
Great Article Sam. I wonder how much of home ownership to Millennials and younger generation will be through inheritance/gifts from family versus traditional purchasing. I know my family couldn’t afford to help me with my home purchases and think that there will be a significant increase in home ownership through this vehicle than other generations. I know I am planning on having to do that with my kids should they decide to continue to live near in our HCOL area. Not sure if that trend will continue but that would certainly continue to effect supply and demand and keep home ownership scarce.
I wonder what the data on inheritance and transfer of land is currently. Although there are plenty of ways to “sell” land, place in trusts, etc that would muddy the statistics.
We started relatively early but have bought many properties as part of our financial strategy.
Property 1: Age 24
Properties 2 and 3: Age 27
Properties 4, 5, 6, and 7: Age 29
Property 8: Age 30
We have lived in 3 of these properties and still own all of them although we are seriously considering selling property 3. Real estate has been fantastic from a wealth building and semi-passive income standpoint and we hope to continue to grow the portfolio.
I’m curious on the value of these properties, and location? 8 properties in 6 years, seems ambitious. Where these purchased awhile ago, or are these more recent?
Good luck with the portfolio.
Total value is right around $1M ($996K to be specific) after appreciation. All the properties are in the greater Cincinnati, OH area which has a relatively lower cost of living. The latest property (property 8) was purchased this year. All used financing with a 75% to 85% LTV and return 24% cash on cash or greater.
Deals are tougher right now and so is financing so we’ve had to slow down. Always need to stick to the numbers you know you’re comfortable with.