5 Ways to Boost Young Adults Over the Homeownership Hurdle

A father gives his adult son a hand up on a mountain.

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When we talk about building wealth, homeownership is historically one of the biggest steps for young adults in America. It's not just about having a place to call your own — it's about creating financial stability and building long-term wealth through home equity. But let's face it, the journey to homeownership is not always as smooth as we hope, especially with the financial challenges many Zoomers (Gen Zers) and Millennials face today.

According to a survey by Bankrate, society often expects young adults to buy their first home around age 28. However, a report by Clever Real Estate reveals a different reality. Many college graduates burdened with student loans don't see homeownership as a possibility until they reach 35 — a whole seven years later!

Even those lucky enough not to have student debt are pushing their homeownership plans to around age 30. You see, this homeownership delay, whether due to student debt or other factors, can be a roadblock to wealth-building. Why? Because owning a home is a tried-and-true way of building wealth.

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In fact, home equity and retirement accounts often make up about 60% of a household's net worth, according to the U.S. Census Bureau and the National Association of Realtors. The Clever Real Estate report found that nearly half of undergraduates with student debt plan to delay buying a house because of their loans. A study by the Federal Reserve shows the reality of this impact. For every $1,000 increase in student loan debt, homeownership rates decrease by about 1.5%. This means an average delay of about 2½ months in becoming a homeowner.

Breaking through the barriers

Delaying homeownership can have long-term effects. It's not just about missing out on building equity — it also impacts overall financial stability. Homeownership brings a sense of security, allowing people to put down roots in a community and benefit from potential property value appreciation. But by pushing back homeownership, young adults lose out on these financial growth opportunities.

Yes, the challenges of student loan debt and rising education costs can be intimidating. But guess what? There are strategies that young adults can adopt to tackle these obstacles and turn their homeownership dreams into reality.

1. Financial education and planning.

Knowledge is power. Young adults should invest time in financial education and seek advice from professionals. This would help them understand their options and map out a realistic plan toward homeownership. This includes understanding student loan repayment options, effective budgeting and saving strategies for a down payment.

2. Exploring alternative paths.

There's more than one way to become a homeowner. Consider buying a smaller starter home or looking into shared ownership arrangements. These options can help young adults enter the housing market sooner and start building equity.

3. Seeking down payment assistance.

Did you know that there are down payment assistance programs at local, state and federal levels? These programs can provide financial help to young adults trying to save for a down payment. To learn more about your eligibility for these programs and how to apply, talk to your trusted mortgage and tax professionals and visit the appropriate federal, state and local websites.

4. Prioritizing debt repayment.

It might be tempting to delay student loan payments to save for a down payment, but finding a balance is key. Prioritizing debt repayment can help improve credit scores and increase the chances of qualifying for a mortgage with favorable terms.

5. Exploring rent-to-own options.

Rent-to-own arrangements offer a chance to rent a property with the option to buy it later. This can be a practical option for those who want to start building equity while working toward homeownership.

Financial institutions and professionals have a crucial role in guiding young adults through the challenges of delayed homeownership. By providing educational programs, custom financial products and personalized advice, these institutions can empower young adults to make informed decisions and navigate the path to homeownership.

Delayed homeownership among young adults in America, especially due to student loan debt, is a real issue that needs attention. But with the right understanding of the long-term impacts and proactive steps toward homeownership, young adults can overcome these hurdles and lay the foundation for long-term financial security.

Disclaimer

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

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Sara Stanich is a Certified Financial Planner practitioner, Certified Divorce Financial Analyst (CDFA), Certified Exit Planning Advisor (CEPA) and founder of Cultivating Wealth, an SEC-Registered Investment Adviser. Sara has been a financial adviser since 2007, which followed 12 years in marketing roles and an MBA from New York University. She is a frequent source for the financial press, and has been quoted in Investor’s Business Daily, U.S. News and World Report, and CBS News. After over 25 years in New York City, Sara recently moved to the beach with her husband, three kids and Labrador retriever. She frequently blogs at cultivatingwealth.com.