What's Up with the Rising Age of Homebuyers?
In a survey released last November, the National Association of REALTORS® found that the median age of a first-time homebuyer in the United States had risen to 40. That ranks as an all-time high for this figure.
And it’s not just first-time buyers who are getting older. The same survey found that the median age of repeat homebuyers, those buying a home for at least a second time, had soared to a record-high of 62.
Why are homebuyers getting older? The REALTORS® association pointed to a host of factors.
The costs
The biggest factor? Simply put, homes are getting more expensive. And because of this, first-time homebuyers are taking longer to save the money they need to cover down payments and closing costs.
Then there’s the monthly mortgage payment. When homes are more expensive, mortgage payments are bigger. Many otherwise younger homeowners might not feel comfortable today buying a home because of these financial pressures.
The National Association of REALTORS® reported that the median sales price of a U.S. home stood at $415,200 in September. This means that half of all existing homes in the country sold for more than that number, and half sold for less. That’s a high figure and might be intimidating to younger buyers who might decide to continue renting instead of buying.
Interest rates
At the same time, mortgage interest rates remain higher than the historic lows seen in 2020 and 2021. Freddie Mac reported that as of Nov. 13, the average interest rate on a 30-year fixed-rate mortgage stood at 6.24%. That rate isn’t high historically. But it’s much higher than 3% interest rates that many homebuyers were nabbing for 30-year mortgages in 2021.
The higher mortgage interest rate results in a higher monthly mortgage payment. That, of course, makes it more challenging for younger buyers to purchase a home.
Higher interest rates also affect repeat buyers. Many homeowners either bought a home in 2020 or 2021 or refinanced their existing mortgages during this time. If they now have a mortgage interest rate in the 3% range, they might be hesitant to buy a new home if they’ll need to swap that low-rate mortgage for one with a rate above 6%.
What does this mean if you’re shopping for a new home?
If you are ready to buy a home today, it’s essential to understand the shifting dynamics of the real estate market.
Don’t expect mortgage interest rates to return to that 3% or 4% range. Rates hovering around 6% are a return to normal levels. Before you start searching for a home, determine how much of a monthly mortgage payment you can afford and only look for homes that will give you that payment.
Be aware, too, that home prices will be high depending on where you are looking. Take the time to save up enough money for a down payment and closing costs. But make sure you still have enough money left over after spending these dollars to maintain a financial cushion in your savings account.
Finally, don't despair! Every situation is unique, and just because the overall situation looks discouraging doesn't mean you can't buy a house where you live. Work with financial and real estate professionals to map out your plan.