Yahoo Finance Did Boomers Actually Have It Easier When Buying Their First Home?
Young generations are having a difficult time achieving the dream of homeownership. The combination of inflation, soaring mortgage rates, low inventory and high prices are all paving the way for a difficult road.
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Just as the “don’t splurge on the avocado toast” cliche might have become obsolete, the “Ok, boomer,” catchphrase — which captures the feeling that older generations don’t understand their younger counterparts’ issues — might be out of place in this instance.
Indeed, the National Association of Realtors 2024 Home Buyers and Sellers Generational Trends report found that millennials represent 38% of the home buying market, up from 28% last year.
Sure, mortgage rates have been hovering around 7% lately, with the 30-year average rate standing at 6.87% as of June 20, according to Freddie Mac data. And sure, this is more than double where it stood on June 18, 2020 — at 3.13%.
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But consider this: Homebuyers in 1980 — individuals who are now boomers — were faced with 16% mortgage rates, while the average monthly home loan payment had increased 34% from a year earlier, according to a recent Realtor.com report.
First-time buyers likely faced the toughest housing market ever during that period.
“During the years when boomers turned 30, the share of median household income needed to make the typical mortgage payment averaged 33.2%, the highest of any living generation,” the report noted.
Keith Griffith, the author of Realtor.com’s report, said that it’s clear that by one important measure — the typical share of income needed to make monthly mortgage payments — boomers didn’t have it easier than later generations when buying their first homes.
“In fact, many boomers would have faced some of the toughest market conditions on record as they reached the typical age for first-time homebuyers,” said Griffith.
Yet, he added, this doesn’t mean that buying a first home is easy today, with high home prices and mortgage rates pushing homeownership out of reach for many young people.
“But it does suggest that boomers didn’t have it as easy as conventional wisdom would have it,” he said.
For instance, as Michael Collins, CFA, founder and CEO, WinCap Financial, noted, while the U.S. economy was not the most stable when boomers were reaching the age to buy their first homes, the ratio of home prices to median income was much more favorable than it is now, making it much easier to afford a home.
“Additionally, the housing market was not as competitive as it is now, with much lower home prices, as well as the federal government promoting homeownership through programs such as FHA loans, making it even easier for boomers to buy their own homes,” said Collins.
In turn, he added, the combination of more manageable prices and government assistance made it much easier for people in the boomer generation to achieve the dream of homeownership compared to the generations that have followed.
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