Buying A Home Is Still One of the Best Investments to Make, Keep Alive the Hope for Purchasing Your Dream Home

Data taken by the U.S. Census Bureau, 2011-2015, show Filipinos have the third (behind Japanese and Chinese, ahead of Whites, Native Hawaiians, and all others) highest rate of homeownership in Hawaii among all ethnicities.

Almost 60% of Filipinos in Hawaii own the homes they live in. When considering the super high cost of living and real estate in the state, this is fairly high. There’s certainly room for improvement, but this statistic could also reasonably be a lot worse.  The national average homeownership rate is a little higher at 64.4%.

For many Filipinos it doesn’t come as a surprise that our community is doing relatively well in this category. Home ownership is one of our highest priorities and it’s not just about status or a sense of achievement, but we look at owning our own home as the family unit’s security.

Most Filipinos growing up in the 1960-1990s grew up in households where their parents were homeowners, as well as their uncles and aunties. Of course, back then, it was easier with homes prices being lower and banking regulations were more flexible. It was common then for practically any married couple with two steady sources of income to be able to buy their own home.

In fact, it’s possible that home ownership today is linked to the same house that was purchased by baby boomer generation Filipinos in the 1970s-1990s. First, it could be the same house that was inherited and is currently occupied by baby boomers’ descendants. Or second, that house their parents purchased in the 1970s-1990s were sold in the 2000s and the capital gain used by their children to make a healthy downpayment on their own homes.

This is one strategy to explain a fairly high homeownership rate. Another is that Generation X Filipinos lived with their parents for a while and saved a healthy sum for downpayment before leaving the nest and purchasing their own home.

Some millennial Filipinos are following the same cultural pattern, and the fact that they tend to have higher paying jobs than their parents and grandparents, adds to their ability to purchase their own home in a real estate market that’s one of the highest in the nation.

Real Estate is still one of the best investments to make
From a financial standpoint alone, investing in property could be the best financial decision. Consider the rise of inflation relative to the rise of real estate prices. Home prices increase significantly, outpacing inflation rates. Home prices have increased 1,608% since 1970, while inflation has increased 644%. 

In 2021 alone, home prices rose 20%, while inflation grew at a 7.5% pace. If home prices grew at the same rate as inflation since 1970, the median home price today would be just $177,788. Instead, home prices have increased far faster than inflation, soaring to $408,100 as the national average.

Now also consider the rise of annual income with inflation. Rises in annual income have barely been keeping pace with inflation over the last few decades. Overall prices of goods in America have risen 67% since 2000. After adjusting for inflation, however, the median American household income has increased by just 7% in total since 2000 – that’s only 0.3% per year.

So, both the money earned (income) and inflation itself are well behind the pace of real estate rising.

Preparing to own your dream home
Clearly, we see how buying a home is one of the best investments when tracing inflation. But at the same time, this rapid outpacing of home prices to inflation points out why it’s even more difficult for today’s millennials to purchase a home.

How can millennials prepare to buy a home?

*First and foremost, increasing your income potential is the best way to set you on your way to owning a home.

*Lower your debt-to-income ratio. In other words, watch how you spend your money. Avoid buying frivolous things you don’t really need. Look into areas where you can cut costs. Instead of buying a new car, perhaps buy one in still great condition just a few years old. Spend within your means.

*Save for a down payment. Mentioned above is the cultural practice that Filipino families use to save money by not leaving the nest early, like 18-22 years old. Rather, spend just a few years more at home living with your parents to build up your savings war chest. This will help tremendously in putting down a handsome downpayment on a home.

*Maintain a strong, healthy credit score. Bad credit can raise your interest as high as 2 percentage points. That could be equivalent to tens of thousands of dollars and certainly a higher monthly mortgage.

*Understand thoroughly the types of loans available. Shop around for great loan rates.

*Timing is important. Investors, speculators and just your average buyer are always trying to figure out when is the best time to buy a home. When interest rates are high, it’s perhaps not the best time to buy real estate. If your personal finances are in order and prices tend to be lower than normal or stable, perhaps this could be the best time to buy real estate.

*Get sound advice from professionals in the business. But not just any professional, but those who you can trust. Just like shopping for loans, researching a company and the potential professional to represent you in your real estate needs is also important. Word of mouth is a great resource. You’d be surprised at what former clients might have to say about someone who looks good on paper but has a sketchy reputation.

It’s a tough real estate market at this moment. If you are seriously looking to buy, best of luck in your journey.