Buying a house used to be the American dream. A place to call your own, with a big backyard and a gorgeous patio…maybe even an outdoor pool.
For decades, property ownership was seen as the ultimate box to check as an adult. And you can’t tell me that you haven’t snuck a peek at the homes on shows like Selling Sunset and thought to yourself: Life. Goals.
And yet for 3.4 million young Americans, the dream of owning a house is just that: a dream.
Along with a six-figure salary, owning a home is quickly becoming a relic of the past. It’s a goal inching further and further out of reach thanks to soaring home prices, rising inflation, and the increased cost of living.
We have to save longer and hustle harder to have enough money for a down payment. Then when we do get it, we have to commit to the 30 years of repayments and responsibilities that come with having your own property.
I’ve been creeping towards the age when I thought I would own a home. As I do, I find myself constantly wondering: Does it still make sense in today’s world? Or are there better ways to spend your hard-earned money?
Below, I’m going to run through the considerations I’ve encountered while doing some solid soul-searching and number-crunching, to help you figure out whether it’s the best choice for you. And if owning a house doesn’t feel right, don’t panic—I’m also going to share three other financial goals you can aim for instead.
Why are our attitudes changing towards home ownership?
Home ownership was a huge deal back when I was a kid. To some degree, it still is today.
When you’re fresh out of school or just starting a new job, owning your own home can feel like one of the biggest milestones of adulthood. However, in recent years, the question has turned from when you plan to buy a home to if you can afford to buy a home.
Let’s face it: houses don’t come cheap these days.
The average sale price of homes in the US in 2021 was estimated to be $423,600. Almost ten years earlier, the average sale price was $221,100. Look back to 1990, and the average drops to just $123,900.
In fact, a simple look at this graph tells you everything you need to know about how affordable home ownership is for our generation compared to the ones before us:
Life has gotten more expensive in general. Daily necessities like groceries, gas, and heating are on the rise, which makes it challenging to squirrel away enough for a down payment.
It’s not only about the money though. Buying a home comes with a ton of added responsibilities AND much less flexibility. You can’t just up and leave if you feel like a change of scenery. If something breaks, you have to fix it.
For that reason, many younger people are ditching the dream of owning a home in favor of a different kind of dream: the freedom to travel or have more disposable income for other activities.
Buying a home is one of the biggest purchases you can make in your lifetime, so you need to be sure before taking the leap. If you’re still on the fence, here are some of the biggest pros and cons to keep in mind when evaluating whether home ownership is right for you.
Pro: You’re your own landlord
One of the best parts of owning a home is that you’re your own landlord.
You can paint the walls any color you choose. Renovate the house to your exact preferences. Get a pet. Even break a wall (although I wouldn’t recommend it). Because it’s your house, you don’t have to answer to anyone except yourself.
For a lifelong renter, this level of control is an absolute dream compared to living in someone else’s home. You don’t have to ask anyone for permission to make changes and can make your place truly feel like it’s yours.
Con: You’re your own landlord
Being your own landlord can be great…but it can also suck. Unlike in a rental, whenever something goes wrong or needs repairing, it falls to you and you alone to fix it. You have to cover the costs of any maintenance and upkeep in your home—costs that can significantly add up over time.
If you’re in an apartment complex, you may also find yourself having to attend meetings and vote on issues as part of the building’s owners association.
Pro: It can be a good long-term investment
Property isn’t a bulletproof investment, but it sure is less volatile than investing in crypto. Over time, a significant portion of homes will increase in value, which makes a house a viable option for storing and growing your wealth.
Case in point: in our lifetime, the price of property has trended upwards—and despite a few blips, most Americans still believe it’s the most dependable way to invest their money.
With that being said…
Con: Property isn’t a “sure thing”
If you’re anything like me, you’ve probably come across other people telling you to buy property because “it can only increase in value.” This is true for a large portion of people, but no investment in life is a sure thing—not even property.
The housing market is complex, and many factors can affect the sale price of your home, so you need to do your research before you buy. With the Fed increasing interest rates, you also need to be aware that your repayments might increase over time too.
Pro: You have more stability
There’s no way around it: Owning a home definitely gives you more stability. As long as you do your research and make your repayments, you’ll always have a roof over your head. Best of all, you won’t need to uproot your life if your landlord decides they want to sell the place.
Con: You have less freedom
A mortgage comes with stability, but you don’t get that stability for free. Unless you can afford to buy your home outright, you’ll constantly have a mortgage to pay—which means more forward planning, sacrifices, and adjustments.
I, for one, know that if I had bought a house in my twenties, I might not have had the courage to travel the world, ditch my full-time job to pursue freelancing, or to have lived in countries like China, Vietnam, and New Zealand.
Other money goals to aim for instead
Not sure if you want to own a home? I hear you—and that’s completely okay. There are no rules, and you can take as much time as you need to make up your mind. And if home ownership isn’t for you, there are still plenty of financial targets you can aim for.
Whether you don’t want to own a home at the moment or never want to own a home, hitting these goals will help you achieve some degree of financial freedom and put you in the most stable position for the future.
Get an emergency fund
One of the most predictable things about life is that it’s unpredictable.
Your tire blows out. You need costly medical treatment. You need to make an emergency trip home. All of these unexpected events can make a huge dent in your financial stability and even cause you to go into debt (which can create a whole bundle of headaches in the future).
This is where having a stash of emergency money means the difference between freaking out and rolling with the punches.
Before you start investing or building a business, you need to have a safety net to fall back on. Aim to have the equivalent of three to six months worth of earnings in your emergency fund. It should be enough to cover you if something unpredictable happens.
Invest your money
Savings are valuable, but unless you have a super-secret bank account that I’ve never heard of, chances are you’re only storing your wealth with savings—not growing it. That’s where investing wisely can help you achieve financial security and stability.
The key word here is wisely.
We’re not talking about pouring all of your income into as many NFTs as possible or jumping on a get-rich-quick scheme. Your aim should be to diversify your portfolio and invest in stocks that will offer steady growth over a long period of time (think five, 10, or even 20 years).
I know it doesn’t sound super glamorous. But trust me: if you start now, your future self will thank you every single day for the rest of your life.
Start a business or a side hustle
The biggest investment you can make is to invest in yourself.
It’s cheesy, sure—but it’s true. Not only is building something of your own insanely rewarding, but it also gives you valuable skills that you may not have gained otherwise. You’ll learn about managing finances even if you’re not a finance person, understand how to sell products even if you’re not a salesperson, and build confidence in your own skills and abilities.
Plus, if you create a successful business (or an empire👑), you’ll be well on your way to owning a home if you do eventually want one.
Not sure if you have what it takes to turn your hobby into your career? Try to do it on the side first, either as a part-time gig on weekends or in the evenings. This is how I started freelancing before making it my full-time gig.
And if you do want to buy a house, what can you do?
Everything out there may feel like it’s working against you, but don’t give up! Despite how daunting the task at hand might seem, owning a home is still achievable with some adjustments in your spending and lifestyle habits.
Figure out how much you need to save
Hop on to a mortgage calculator and see the amount you need to save for a down payment on your future home. These calculators are incredibly handy when it comes to understanding how much you can afford, how much your repayments will be, and how long it’ll take to pay off your loan. When you know the destination, it’s easier to work backward to figure out how to get there.
Cut back on your debts
Even if you do save enough for a home loan, you won’t be able to borrow as much if you have a ton of existing debt. Banks and other financial institutions look at your credit rating and the amount you owe when deciding how much you’ll be able to borrow. If you’re earning $6,000 a month and making $1,000 in loan repayments, a lender will see your income as $5,000 and adjust the amount you can borrow to suit.
Here’s another tip: if you’re gearing up to buy a house, get rid of as many credit cards as possible. A bank doesn’t only look at how much you owe on your credit card, because that money is always there and ready for you to access. Instead, they assume you are going to max out your credit card and adjust your income based on that. If you have an annual income of $75,000 and an $8,000 credit card limit, then the bank will see your projected income as $67,000—not $75,000.
Make more money
The most effective method to fast-track your goal of saving for a down payment is to generate more income. This additional money can go directly into your savings account and help shave months or years off your goal of owning a home.
So how do you earn more? Find a side hustle to gain some extra income. This is also a fantastic opportunity to explore a potential business idea that you’ve always had brewing in the background, like a consulting business or finally starting that Twitch stream.
Remember: owning a home is just one option in your life
If you want to own a home, then go for it. If you don’t, that’s okay too. Owning a home isn’t a necessity, and there are plenty of other money goals to reach for instead. The key thing to keep in mind is that no matter what you choose, you need to be smart about your financial choices. When you do that, you’ll be able to rest easy knowing you’ve put yourself in the best position possible for the future.