The housing market continues to pose significant challenges for young people trying to buy their first homes. According to the National Association of Realtors (NAR), only 24% of housing sales in 2022 were made by first-time homebuyers. This represents a significant decline from 50% in 2010.
The typical home buyer is now older than in the past. The average age is about 10 years above historical norms. Home prices are near record highs, there are not many homes for sale, and mortgage rates are at their highest levels in years.
There are fewer first-time homebuyers, and they are older than we’ve ever seen, both because of headwinds inside and outside of the housing market,” said NAR deputy chief economist Jessica Lautz. Americans who can’t afford their first homes miss out on the opportunity to build wealth through homeownership. “It’s their biggest asset, and with delays into homeownership, first-time buyers are losing about 10 years of housing wealth,” Lautz explained.
Only about 1 in 5 listed homes in March were affordable for households with an annual income of $75,000.
First-time homebuyer challenges
A household earning $50,000 can only afford 8.7% of listings, down from 9.4% a year ago.
High rents make it hard to save for a down payment. Credit card debt, car loans, and child care costs also strain finances. The resumption of student loan payments has put many people under financial pressure.
Some Americans save for a first home by temporarily moving in with family or friends to minimize rent costs. However, this approach isn’t possible for everyone. “It has been a pathway to ownership for some, but for a 38-year-old, moving in with mom and dad can get uncomfortable,” Lautz pointed out.
The challenges faced by first-time homebuyers are significant. They range from high home prices and low inventory to personal financial burdens. As the path to homeownership becomes increasingly complex, the implications for wealth-building and financial stability among Americans are profound.