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How Buying a Home Before You Turn 30 Is a ‘Wealth Multiplier’
By Adam Hardy MONEY RESEARCH COLLECTIVE
Buying a first home before 30 can dramatically boost wealth, but today’s prices make it harder than ever.
Buying a home has long been a cornerstone strategy of building generational wealth, but new data shows just how much of an advantage first-time homebuyers get if they purchase early.
Americans who buy their first home by age 30 see a 22.5% boost to their net worth by the time they turn 50, compared to those who wait until their 40s, according to a report by Realtor.com released Thursday. The advantage — which the authors refer to as a “wealth multiplier” — translates to a higher net worth of $119,000 on average.
It all boils down to time in the market, experts say.
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View Rates“By gaining more years for appreciation and mortgage paydown, early homebuyers build a foundation of wealth that supports opportunities that cascade into the next generation,” Danielle Hale, chief economist at Realtor.com, said in a statement about the report.
In other words, the earlier you buy a home, the more time you have to build equity in it and enjoy the perks of price appreciation. Not all of the so-called “wealth multiplier” comes from the home itself, however. The report also notes that owning a home provides a degree of financial stability that supports savings and investment elsewhere, which contributes to a higher net worth.
The reality of buying a home at 30
For decades, buying a home at or before age 30 was the norm. These days, it’s the best-case scenario for most Americans.
According to the National Association of Realtors, or NAR, the median age of a first-time homebuyer is now 40. In the 1990s and through much of the 2000s, first-time buyers were usually in their early 30s.
Then the COVID-19 pandemic wrecked the housing market, pushing prices up almost overnight… and boxing out large swaths of younger buyers. They now face a much different homebuying reality than previous generations.
In 1990, the median home price was $96,800, while household income was $31,000, a price-to-income ratio of about 3-to-1, according to Realtor.com. Now home prices are at $418,000, and income is at $85,000, for a ratio of almost 5-to-1.
Separate research from Harvard University’s Joint Center for Housing Studies found that the price-to-income ratio for home buying hit an all-time high recently.
“With home prices so high relative to household incomes, would-be buyers need to save more and for longer to afford a down payment,” research analyst Peyton Whitney wrote in an October report for the group. “Down payments are already a significant barrier to homeownership, especially for first-time buyers, younger people, and households of color.”
Today it takes a typical family nearly 10 years to save enough for a down payment, while it took a little over three years to do so in the 1990s, according to the Realtor.com report.
“Homeownership has long been one of the most reliable ways families build and pass on wealth,” Damian Eales, CEO of Realtor.com, said in a statement. “Yet today, too many young people are stuck on the sidelines because buying a home has become increasingly out of reach.”
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Adam Hardy is Money's lead data journalist. He writes news and feature stories aimed at helping everyday people manage their finances. He joined Money full-time in 2021 but has covered personal finance and economic topics since 2018. Previously, he worked for Forbes Advisor, The Penny Hoarder and Creative Loafing. In addition to those outlets, Adam’s work has been featured in a variety of local, national and international publications, including the Asia Times, Business Insider, Las Vegas Review-Journal, Yahoo! Finance, Nasdaq and several others. Adam graduated with a bachelor’s degree from the University of South Florida, where he studied magazine journalism and sociology. As a first-generation college graduate from a low-income, single-parent household, Adam understands firsthand the financial barriers that plague low-income Americans. His reporting aims to illuminate these issues. Since joining Money, Adam has already written over 300 articles, including a cover story on financial surveillance, a profile of Director Rohit Chopra of the Consumer Financial Protection Bureau and an investigation into flexible spending accounts, which found that workers forfeit billions of dollars annually through the workplace plans. He has also led data analysis on some of Money’s marquee rankings, including Best Places to Live, Best Places to Travel and Best Hospitals. He regularly contributes data reporting for Best Colleges, Best Banks and other lists as well. Adam also holds a multimedia storytelling certificate from Poynter’s News University and a data journalism certificate from the Investigative Reporters and Editors (IRE) at the University of Missouri. In 2017, he received an English teaching certification from the University of Cambridge, which he utilized during his time in Seoul, South Korea. There, he taught students of all ages, from 5 to 65, and worked with North Korean refugees who were resettling in the area. Now, Adam lives in Saint Petersburg, Florida, with his pup Bambi. He is a card-carrying shuffleboard club member.