After graduating college and getting married, purchasing a home has been the protocol in American culture. But despite great market conditions, circumstances such as tough economic times, increased requirements for mortgages and hesitant attitudes cause many young Americans to delay the purchase of their first home.
Amid low interest rates and relatively inexpensive prices, the age of first-time homeowners has remained high while younger couples and singles have a more fluid interpretation of the word home. For some it means apartments or condos and for others it may even be the basement of their parents’ home.
The average age of a first-time homeowner is 34, according to the most recent American Housing Survey data collected in 2009. Once first-time homeowners made up nearly half of all existing-home sales, but they now make up 35 percent, according to a recently released National Association of Realtors report. Daron Young, project manager at Ivory Homes, said young people are hesitant to buy a home.
“The typical college graduate who is married and just got a job in Utah who typically would be in the market to buy a home is more hesitant now and they’re more likely to double up and either live with their parents for a time or move in and live with someone else and rent for a period of time until they feel more comfortable,” Young said.
Matt Stephens and Allison Stephens live in an apartment in Sandy with their daughter. Both have graduated from college and have jobs but said they do not want to buy a house yet because they feel their time in Utah is temporary. Matt is also going back to school to get an MBA, but even then they aren’t sure if they’ll settle in a home.
“It depends what kind of job he gets and what the housing market is like,” Allison said. “If the market is so unstable still, I don’t want to buy a home if it will lose a ton of its value or if there is a chance we’ll relocate and have to sell. We might not be able to sell it.”
Countless loan defaults in the mid 2000s led to stricter and increased requirements for mortgages when compared to previous years. This is one factor deterring people from buying homes at a younger age.
“It’s just arms and legs different,” Young said. “Before you could have a credit score around 500 or they didn’t even ask. You didn’t need income and you didn’t need anything down. Whereas now you need so much documentation that you are making money, that you have cash, that you have reserve in order to get a home loan. So anyone where there’s even a questionable or uncertain financial situation, even if they’ve got the cash available, if their credit score was ever hit in the last three years, they’re probably not going to qualify.”
Curtis Price from WJ Bradley Mortgage said credit scores and documentation of income are used to determine if people qualify for a mortgage. Price said some people can afford more than they show on paper, but that won’t help them qualify.
“Now we can only go off of how much their income documentation shows they pay taxes on,” Price said.
Saving enough money for a substantial down payment required for a mortgage also takes time, said Kevin Larsen from Coldwell Banker’s Salt Lake office. This may hold people back from buying a home for years.
With one in every 450 houses foreclosing in Utah, according to RealtyTrac, and unemployment rates high throughout the country, many potential first-time homeowners fear taking out a mortgage. Afton January, foreclosure counselor at Utah Housing Coalition, said fear prevents many people from buying a home.
“People are afraid the home won’t be worth what they paid for it,” she said. “People are afraid they’ll lose their jobs and not be able to meet their mortgage obligations and end up foreclosing. And I think people are just afraid of home ownership in general because of what we’ve seen over the past couple of years.”
Allison Stephens said she fears being tied down to a mortgage and the maintenance that comes with home ownership.
“It’s convenient renting because we have a maintenance person and just a year contract,” Stephens said.
Confidence in the market, Price said, is another reason people delay home ownership.
“As long as people are questioning the stock market and if people are going to get hired, then there aren’t going to be the jobs necessary and the confidence necessary for people to take the step and buy a new home,” Price said.
Other trends such as the average age of marriage may play a role. The average age of marriage is currently 26.1, according to the U.S. Bureau of the Census, a drastic jump from 20.3 in 1960.
In 1960 the average age of a first-time homeowner was 24-25, according to David Berson in the journal Business Economics, a time when Afton January, foreclosure counselor at Utah Housing Coalition, says Americans thought of homes as a permanent dwelling place. As time went on people started looking at homes as more of a temporary investment and terms such as “starter home” became common. Now, the age at which people purchase homes is higher.
Student Anthony Butler from Tri Cities, Wash., said he has noticed a trend toward renting among the younger generation.
“People seem to be more mobile these days so they will rent instead for just a couple of years,” he said. “People get a job here and then there, so they move around and it’s easier to rent.”
Hill, who rents an apartment, said he plans to move into a larger apartment before a home, but he hopes to be in a home by the mid-late 20s.
But with many young people looking to rent instead of buy, along with those who have had to foreclose or short sale their home, the rental market is going up, Curtis said.
Other young people are doubling up in family and friends’ homes for the time being.
“A lot of people are in this weird in-between place where they’re neither homeowners or renters, nor are they homeless living on the streets,” January said. “I like to refer to them as displaced families.”
But for those in a position to buy, circumstances could not be better, January said. With a solid credit score, a bundle of money for a down payment and a secure job, she said there is absolutely no reason why young people should delay home ownership. For those who can get mortgages, Price emphasized, “Rates are great.”
The Stephens said despite their reservations now, they are hopeful and excited to own a home in the future.
“Within the next five years I would love to settle in and purchase our first home,” Allison said. “But I want to make sure we have a stable job and that we’ll be there for a while.”