How Much Did Baby Boomers Pay for Their First Homes? Millennials Would Be Shocked
Written by
Casey Bond
Edited by
Ashleigh Ray
Commitment to Our Readers
GOBankingRates' editorial team is committed to bringing you unbiased reviews and information. We use data-driven methodologies to evaluate financial products and services - our reviews and ratings are not influenced by advertisers. You can read more about our editorial guidelines and our products and services review methodology.
20 Years
Helping You Live Richer
Reviewed
by Experts
Trusted by
Millions of Readers
If you feel like homeownership is a slice of the American Dream you may never be able to afford, you’re not the only one.
According to the latest Future of Ownership study by Chase, which looks at what millennial and Gen Z adults really think about achieving traditional milestones like car and homeownership in today’s economy, 78% of respondents are worried about how the economy will impact their ability to purchase a home.
Interest rates are delaying the purchase for 72% of respondents, and only 45% are confident in their ability to buy a home when they want one. But the struggle among young adults to afford homes is not new.
“In the last decade, the dream of homeownership has been reframed by an ever-widening gap between soaring home prices and relatively stagnant incomes,” said Matt Dunbar, senior vice president of the southeast region at Churchill Mortgage. “This divergence, starkly depicted by recent data, points to a new reality where home prices have risen much faster than the average person’s ability to pay for them.”
Over the last decade, the median home price increased about 30% while incomes rose just 11% over the same time period. However, the gap is even more significant when you examine the past 50 years or so.
When accounting for inflation, home prices have increased 118% since 1965, while income has risen by just 15%, according to a report by Clever Real Estate, based on Census data.
To put that into dollars, consider that the typical baby boomer turned 30 around 1985 when the average single-family home cost $82,800. Meanwhile, the average millennial who turned 30 in 2019 would have spent $313,000 on a home.
“In fact, if home prices grew at the same rate as inflation since 1970, the median home price today would be just $177,788 — rather than $408,100,” the report noted.
If homeownership is a goal that you’re pursuing, there are a few steps you can take to make that dream a reality.
Have a Strategic Plan in Place
“Recognizing the shift in affordability is the first step, highlighting the need for a savings plan that accounts for these economic changes,” Dunbar said. “It’s no longer just about setting aside money for a down payment; it’s about creating a substantial financial buffer that allows for flexibility in competitive market conditions.”
Dunbar explained that budgeting for a home purchase today means preparing not just for the list price of a home, but also for the possibility of a bidding war, which is particularly common in high-demand areas.
“This requires having a clear understanding of your limits and ensuring you have the financial leeway to make a competitive offer without jeopardizing your future,” he said.
Craft a Detailed Budget
If you don’t already have a budget in place, now is the time to create one. Start by itemizing all your sources of monthly income and compare the total to your expenses.
This will give you a clear picture of your cash flow and whether you have enough extra money at the end of the month to put toward saving for a home down payment and eventually, making mortgage payments.
“When setting this budget, consider the ’28/36 rule’ to keep housing and total debt costs in check relative to your income,” Dunbar said. “And remember, budgeting for a home means accounting for all the associated costs, from closing fees to maintenance and emergency repairs.”
Work With the Right Pros
When it comes to choosing a lender and real estate agent, Dunbar said it’s important to look for professionals who put your best interests over any potential commission.
“A good lender will advise you on a loan that you can comfortably afford in the long term, rather than stretching your finances to their limits, ” he said. “They should also be transparent about all the costs involved in taking out a mortgage and the long-term financial implications.”
The same is true when choosing a real estate agent. “They should be a partner who is committed to finding you a home that meets both your needs and your budget, and who understands that your satisfaction with the purchase is more valuable than the potential for a higher commission,” Dunbar added.
Also, keep in mind that while these professionals are often key players in the homebuying process, you should still do your own research and have a deep understanding of your financial situation.
“Don’t be swayed by pressure to increase your budget or rush into a decision,” Dunbar warned. “The right professionals will respect your pace and decisions.”
More From GOBankingRates
