A great stage of life for getting into the housing market is 30 and older. Soaring prices have created a fear of missing out on home ownership, which in turn creates a sense of urgency about getting in the real estate market as soon as possible. But waiting until your 30s offers some strong advantages for both your life and finances. Here are five of them:
Being open to moving to other cities or countries in your 20s can pay off with job experience that advances your career and pay. As we progress through the pandemic, don’t count on remote work allowing you to live in one city and virtually work in another.
Home ownership roots you to a city, emotionally and financially. You’re going to want to settle down after you buy, not pick up and move across the country.
Sure, you can rent out your home while you’re in another city or country. But then you have landlord responsibilities and the risk of high-maintenance tenants. And, there’s the question of whether the rent will cover today’s mortgage payments plus property taxes and maintenance.
The housing market is hot enough now that selling a home even after a year or two can deliver a net profit after real-estate commissions and fees for legal advice and moving. But markets do stagnate or fall sometimes. Your career advancement in another city could hinge on trying to sell a house that, after fees, brings in less than you paid a couple of years ago.
A chance to build your savings …
Waiting until your 30s helps you build your home down payment and other aspects of personal wealth. A big mistake of home ownership is to buy a property with minimal financial resources beyond your down payment. A Plan B fund for emergencies is a must – aim for a few thousand dollars, at least.
Buying at 30 or older also gives you a chance to invest in a tax-free savings account. You might tap your TFSA for home down payment money, but ideally there’s something left over for a thirtysomething after buying a home. This money could be the seed for retirement saving.
Home prices today are rising at a much faster rate than people can build down payments, which argues for jumping into housing now. But what we’re seeing in real estate now is a special situation brought on by low interest rates and a pandemic-driven hunger for living space. Normally, you should be able to outpace home price appreciation with your saving for a down payment.
… and live your life
Owning a home is like being parent to a baby – constant demands on your time and finances. It’s hard to get away somewhere exotic for a week when there are costly maintenance matters to attend to at home.
Travel opportunities may open up as you get older and earn more. But there’s something great about the travel you do in your younger years, when you’re more flexible and open minded. Also, travel in your 40s might be to Disney World with the kids. Use your 20s to do one great trip that you’d otherwise have to put off indefinitely.
Buy as a couple
The cost of home ownership is much more affordable for two people than one. Buying in your 30s gives you time to meet the person with whom you want to build a future that includes buying a home.
A trend to watch in housing is people co-buying houses with friends or family members. But owning a house and raising a family in it are highly personal matters. Better to share with your life partner than your friend from yoga class.
Governments are promising to build more houses
A good reason for today’s twentysomethings to pause on home buying is the prospect of a better supply of new homes in the years ahead.
One of the reasons – not the reason – why real estate prices have increased so much is that there’s more demand for houses than supply. Governments at all levels recognize this and are promising to reduce impediments to home building. A better supply of houses in the years ahead would address demand and reduce upward pressure on prices. If there’s an overshoot on home building and supply exceeds demand, prices might actually fall.
PERSONAL FINANCE COLUMNIST
The Globe and Mail, April 4, 2022