The past decade has seen California’s typical first-time homebuyer demographic make a somewhat tepid entrance into the housing market.
This group has been defined by their coming of age during the 2008 recession and the long recovery that followed. Delayed careers, fewer household formations and slow income gains worked together to postpone homeownership for many young adults.
But things are finally beginning to look up for this beleaguered generation of would-be homebuyers. In 2019, ten years after the conclusion of the recession, members of this demographic are finally reaching their own recovery. California job numbers are nearing a full recovery and incomes continue to rise, making 2019 a more optimistic time for young adults.
These improving conditions are put on display in a survey conducted for Northwestern Mutual in 2009 and 2019:
Source: Northwestern Mutual Survey
In 2009, the young adults surveyed (then aged 25 and older) were experiencing the Great Recession, with very few reporting financial security. Unsurprisingly, financial instability provides a poor foundation for homeownership. This is reflected in the homeownership delay seen in young adults.
But the good news: in 2019, this same group was surveyed again (now aged 35 and older), with more promising results.
As this group of young adults has aged, their financial goals and career plans have shifted to become less risky. As their caution has grown, their optimism in their own financial acumen has grown, as:
- 88% say their financial habits have improved;
- 74% say they are carrying less debt;
- 74% report becoming more frugal; and
- 73% say their overall financial situation has improved since 2009.
Older and wiser first-time homebuyers
California’s population of first-time homebuyers has aged significantly since the housing crash and Great Recession. Nationally, one-in-three first-time homebuyers are over 40 years old and 16% are over 50.
Older first-time homebuyers tend to be:
- more likely to use savings to cover their down payment; and
- less likely to rely on down payment gifts.
While any person with a pulse could walk into a bank and take out a mortgage during the Millennium Boom, today’s buyers are more qualified. This is out of necessity, due to the ability-to-repay rules, but also due to choice born of age and experience. The result is a more stable, healthier outlook for housing as today’s homebuyers are actually able to pay back mortgages, avoiding the default and financial ruin of the post-Millennium Boom crash.
A return to stability is especially important in 2019, as we look ahead to the next recession. Anticipated to arrive in mid-2020, this next recession will make ripples, reducing sales volume and prices, but the housing market won’t fall to the same depths as during the 2008 recession. Regulations put in place since the last bust — and a more cautious homebuying population — will safeguard against another crisis.