Every generation has its own challenges; for young would-be or “would-like-to-be” homeowners today, it’s finding and securing a home. Many of my clients, especially either millennials or Gen Z, are learning what homeownership means regarding planning, saving, and, economically speaking, rolling with the punches.
It’s not an easy time to become a homeowner; real estate values have skyrocketed over the past few decades, especially in the Greater Boston area, pacing well beyond what the average wages are, so it makes sense that the younger generations have lots of questions (and frustrations) regarding home ownership.
While I’m not a real estate professional or economist, I will provide some insights for hopeful homeowners and address some of the questions I often hear as a family financial planner.
When Should I Buy a Home? – Homes as Stocks?
In recent years, there has been a “gold rush” mentality regarding real estate ownership. As the post-pandemic real estate rush happened, many people with pent-up capital rushed to snatch up any piece of real estate they could, as the market had been growing before COVID-19. Property Shark has found that between 2009 and 2019, the average home value in Greater Boston had increased 66%, with some neighborhoods like East Boston doubling that percentage. It’s no wonder many people, including developers with deep pockets, would look to get in on returns like that. But what does that mean for first-time homebuyers?
As a Boston financial planner, in my opinion, it’s a dangerous game to put all your chips on the table and head into debt to get it on real estate solely as an investment to flip/turn over, especially for younger investors.
The Overlooked Costs of Homeownership
The commonly overlooked costs of homeownership, such as property taxes, closing fees, HOA fees, insurance, maintenance/repair fees, and many others, can be challenging for eager investors. Buying a home differs from purchasing a stock; its costs leave little room for a margin of error, and overextending your finances and raking up debts is ill-advised in a potentially volatile market space.
My advice to my clients with young families just starting is this: renting is a good option, and as lovely as it is to start building equity through homeownership, take your time to get on a hot market. Your first home is not a stock; it’s a place to start working toward growing wealth and building foundations for your family to expand upon.
I’ve spoken with many homeowners who regret rushing into property acquisition; they wish they had watched the market more carefully, waited for interest rates to lower, found a place that didn’t need so much work, and so forth. Patience is a virtue when looking for your first home.
When Should I Buy a Home – Families Looking to Upgrade
On the flip side of the coin, families who are well-established in their first home and looking to upgrade have different considerations. Whether it’s for space consideration, quality of schools, proximity to work/family, or any other reason, chances are some sacrifices will be made, but that’s okay if you and yours agree those are sacrifices everyone is willing to make.
When my wife and I knew we had our first child, we knew it was time to move out of Boston City proper. As much as we didn’t want to leave the city’s action/nightlife/dining options, we knew that as our family grew, the space we would need wouldn’t be as affordable as we could find elsewhere. We moved to the North Shore and couldn’t be happier because it fits our needs as a growing family.
My best advice for growing families is this: it’s all about balancing expectations and making decisions on the definitives of your family’s needs. If space is a priority, location may have to take a backseat. If school districts matter most, space and acreage may need to be deprioritized. Don’t buy on speculation that a certain town may increase in property value or that it’s a chance to fix up/flip a second home. Not everything is as easy as it looks on HGTV.
When Should I Buy a Home?
My message for all homebuyers, young and old, is don’t view property ownership as a get-rich-quick solution, regardless of how hot the market is. Don’t buy a home for fear of missing out (FOMO); plan, strategize, and set financial foundation goals. An experienced advisor will help you determine the risk vs. reward if an opportunity presents itself and help reduce the risk of buyer’s remorse.
If you’d like to discuss the prospect of homeownership, 2nd homeownership, and beyond, please reach out; I’d be happy to start the conversation.
