First-time homebuyers in America are hitting an unprecedented milestone, and it’s not one they’ll be celebrating.
According to the latest data from the National Association of Realtors (NAR), the median age for first-time buyers has surged to 38 — the oldest on record and up three years from just last summer.
Gone are the days when 20-somethings snagged their first slice of the American dream.
Back in the 1980s, first-time homebuyers were typically in their late 20s.
Now, the dream of homeownership feels more like an uphill battle, thanks to a perfect storm of skyrocketing prices, dwindling housing supply and cutthroat competition from buyers with deeper pockets.
“The first-time homebuyer who can enter into today’s market is older, has a higher income [and] is wealthier,” Jessica Lautz, deputy chief economist at NAR, told CNBC. Simply put, today’s buyers need more financial muscle to cover those jaw-dropping down payments.
This year, only 24% of home purchases were by first-time buyers — the lowest share since NAR began keeping track in 1981. With a staggering housing shortage estimated at 4 million homes and relentless price inflation, it’s easy to see why younger generations are feeling boxed out.
“The biggest issue of housing today” is this shortage, Orphe Divounguy, senior economist at Zillow, pointed out to the outlet.
Some construction gains were made recently, with single-family home projects seeing a 2.7% uptick in September, but the housing market remains under severe pressure.
The price of a typical starter home rose to $250,000 in August, up from $240,000 the year before, according to Redfin. Homeownership has largely become a game for repeat buyers who can tap into their existing home equity, often sidestepping mortgage struggles altogether.
About 26% of buyers this year paid for their homes in cash — an all-time high, says NAR. This trend has left younger adults watching from the sidelines while baby boomers and retirees solidify their status as the market’s top players.
“When we look at the average homebuyer, for older buyers, they have about $300,000 in home equity versus younger millennial buyers,” Selma Hepp, chief economist at CoreLogic, told CNBC.
Meanwhile, renters are finding themselves stuck in place as rent costs continue to outpace wage growth. At the height of 2022, rents spiked by 16% annually, while wages peaked at only 9.3%, according to Indeed.
The squeeze means that over half of renter households are spending more than 30% of their income just to keep a roof over their heads.
“We’re seeing renters staying renters for longer because affordability has been so squeezed,” Divounguy said.
High monthly rent payments and existing debt, like student loans, are eating into any chance for future homeownership. This contributes to high debt-to-income ratios, an obstacle for securing a mortgage.
As Lautz put it, “All of these things snowball, especially in an inflationary environment.”
If this trend doesn’t change, the American dream of homeownership may become a relic of the past for younger generations.
During a CNBC ‘Your Money’ event, Jonathan Scott from HGTV’s “Property Brothers” issued a grim warning: “Give it another 20 years and literally no young person will be able to afford to purchase a home, period.”