These days, millions of Americans may be mulling their options when it comes to getting into the housing market, because affordability is still quite high in comparison with historical norms, and won't be for much longer. A lot of that knowledge, though, comes at something of a price; experts say that a lot of people who might not actually be able to afford a mortgage in the long-term are now thinking about buying, and that is especially true of younger adults.
The millennial generation has long been hailed as an inevitable savior of sorts for the housing market. They generally hold homeownership in high regard and have it set as a goal for themselves in their lives, but haven't been able to get into the market for a number of reasons. Now that the economy has improved following the recession and its long-term effects, and they've had a few extra years to build a positive credit history, many are now able to buy homes after being locked out of the market for so long.
But is that a good thing?
Recent data from the Federal Reserve Bank of St. Louis shows that it might actually be wise for young people to wait a little longer to buy their homes – even if those properties get more expensive as a result of rising mortgage rates and property values – because even if they are technically ready to buy financially, the process might destabilize the positive momentum they'd been building, according to a report from TIME Money. Even older millennials – those in their early and mid-30s – may not be as fully prepared for homeownership as they think.
In general, young people today are going to be less wealthy than previous generations would have been at the same age, and that's especially true in comparison with their parents, who tend to be baby boomers, the report said. While the older people of the boomer generation saw their wealth grow some 40 percent from 1989 to 2013, the younger ones (those between 40 and 61) saw theirs fall 31 percent, and Generation X and the millennials watched theirs drop 28 percent. The two youngest generations consequently only had some $14,000 in median household wealth to their names.
What does that tell would-be buyers?
Buying a home is obviously an expensive process, that costs tens of thousands of dollars between down payments, closing costs, and so on. That's in addition to other expenses that people will incur every month prior to owning a home (rent, utilities, etc.) which can add up quickly as well. So it's often important for younger adults with little experience in the market to build their wealth far more significantly than they might think is required to buy a home. That will provide something of a safety net and help them avoid mortgage delinquency and default going forward.
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