Personal Finance

I'm 35 and I feel like I'll never own a home. Here's why that's likely not the case.

Chris MacDonald

Published: December 11, 2024 1:45 pm

The homeownership track is one that many would consider to be integral to the whole “American Dream” ideal. Building equity while living in the house one raises their kids is part of a vision of the future so many young investors have. 

It’s true that more than 70% of the typical American’s household wealth is tied up in one’s personal residence. Accordingly, this is an asset class that’s become among the most powerful wealth-building tools for the middle class, and that’s unlikely to change anytime soon.

But with interest rates nearing a generational high, and housing prices at an all-time high, it’s also true that many Millennials in the 35-year old range may feel like their prospects of ever owning a home have dwindled substantially. That’s mostly because interest rates remain very high (and have actually increased since the Federal Reserve cut the overnight lending rate by 50 basis points), while housing prices continue to climb in most major markets.

Experts often view age 35 as ideal for those looking to own a home and begin building equity, as that’s around the age where many households begin to form and folks enter their prime earning years. And while overall sentiment among many Millennials may be more dire than at other points in the past, there’s certainly reason why many in this age group shouldn’t fret about their future.

Key Points About This Article:

• Feelings of dismay among many members of the Millennial age group are growing more widespread, as prices continue to rise while interest rates remain high.
• However, it’s not all doom and gloom for those in this age group – here’s what to consider for those thinking of becoming a homeowner over the next few years.
• Also: Take this quiz to see if you’re on track to retire (Sponsored)

The Reality of Modern Homeownership

Homeownership remains the dream for many households, but as mentioned, a 54% surge in home prices since 2019 paints a different reality for many households that haven’t seen their incomes increase by this same amount. Getting a mortgage approval is harder than ever for many households, given the fact that the average mortgage payment is up around 50% from the rock-bottom mortgage rates we saw following the pandemic. 

Accordingly, the thought of a massive 20% down payment on a house that could have nearly doubled in value in just a few years may lead to some skepticism among buyers, and for good reasons. The thought was that higher mortgage rates should have led to slower demand (and lower prices), which didn’t materialize. But if interest rates do drop over time (as the Fed’s cutting cycle continues), many Millennials are concerned about being priced out of the market even more in the coming years.

In reality, a 20% down payment on most homes isn’t the reality for most first time homebuyers. In fact, the average down payment was just 14.4% in 2023, with first time homebuyers typically putting down a much smaller down payment which is often granted via various loan programs.

For those looking to get on the property ladder, accepting a slightly higher mortgage payment (and paying PMI for a few years) may be an acceptable tradeoff to get into the house one wants to own for at least the next five years, and start building equity. Additionally, while real estate corrections do happen, one has to combat the question of, say, whether accepting a 10% decline over the next two years makes sense if housing prices rise 20% first. No one has a crystal ball, and it’s impossible to know where the market will be headed over any time frame (though, over the long-term, real estate prices have always trended higher).

Looking At the Numbers

The home buying landscape for Millennials and Gen Z buyers continues to evolve, and is much more tricky to navigate for many. Those in their late-20s or early-30s have unique challenges and opportunities in this market. On the positive side of things, it’s worth noting that Gen Z buying trends suggest that total homeownership for this group may actually surpass Millennials at the same age, though we’ll have to see if this trend continues over time. As of 2023, approximately 27.8% of 24-year-old Gen Zers own homes, slightly higher than the 24.5% of Millennials who were homeowners at the same age. This trend indicates that Gen Z is entering the housing market earlier than previous generations did.

So, while many 35 year olds may feel discouraged due to mortgage rates being the highest they have in some time and affordability challenges overall, there are programs in place for younger buyers to get into the homeownership game. And with the largest intra-generational wealth transfer in history soon to take place (with many baby boomers passing away and leaving their wealth, much of which is in their homes, to Millennials), perhaps these trends will reverse in short order.

But the reality is that both Millennials and Gen Z buyers do face one of the more difficult housing markets in recent history, with overall affordability at its lowest level in more than three decades.

Why 35 Is Not Too Late

Saving up for a down payment may seem daunting at any age, but the increased usage of FHA mortgages and other products which allow for down payments as low as 3.5% can help Millennial homebuyers in their ability to at least get started on the wealth building journey. If one takes the more traditional approach of waiting to save a 20% down payment on their desired home in their desired neighborhood, it’s true that time out of the market can be one’s enemy. And while most financial advisors will tell first time buyers to have as large a down payment as possible, others suggest that getting on the property ladder is more important. If homebuyers have the ability to make extra payments in earlier years to effectively create a 20% equity cushion over a few years, for example, that could cushion the impact of putting down a smaller down payment to begin with.

Again, no one knows where the property market is headed from here. Prices could most certainly decline in the years to come, and that would be a welcome trend for millions of Millennials and Gen Z buyers looking to get into the market.

However, with limited supply of new homes coming onto the market and a wave of new buyers entering the market each year, the dynamics we’re seeing play out right now may continue for some time. Thus, for those who are able to put together two decent incomes (which are needed in most major markets) to buy a home with a smaller down payment, now may be a decent time to do so. If mortgage rates do come down in line with Fed Funds Rate declines in the years to come, refinancing activity should pick up leading to more breathing room for households. And if they don’t, so long as a household has a margin of safety with their savings and earnings potential, a locked in 30 year mortgage should provide stability no matter where interest rates go.