In recent years, the landscape of homeownership in the United States has undergone significant transformations. The National Association of Realtors (NAR) reported that the median age of first-time homebuyers has surged to an unprecedented 38 years old in 2024. This figure represents not only a demographic shift but also highlights evolving economic circumstances that have delayed homeownership for younger generations. In comparison, buyers in the 1980s were typically in their late 20s, indicating a noteworthy delay in entering the housing market.
So, why are first-time homebuyers getting older? According to Jessica Lautz, NAR’s deputy chief economist, today’s prospective buyers are generally more affluent than their predecessors—not only are they older, but they also possess higher incomes and greater wealth. This economic stability is crucial as rising property prices necessitate larger down payments, creating additional barriers for younger adults hoping to purchase their first homes.
Compounding the issue is the decline in the share of first-time homebuyers in the housing market, dropping from 32% to just 24% over the past year—marking the lowest levels since the NAR began tracking this information in 1981. Attributes such as a persistent shortage of available housing, tough competition against wealthier buyers, and escalating rental costs have collectively made the path to homeownership increasingly convoluted.
Experts agree that the current housing shortage is one of the most pressing issues affecting access to homeownership today. Orphe Divounguy, a senior economist at Zillow, notes that the supply gap has reached a staggering four million homes as of mid-2023, an obstacle that is not expected to resolve itself quickly. With the construction of new homes lagging, a larger number of buyers are vying for a limited inventory, leading to higher prices and even fiercer competition.
The prolonged shortage of affordable housing has broad implications for the entire economy. As Jonathan Scott, co-host of the HGTV series “Property Brothers,” points out, failure to act could result in a future where young adults can no longer afford homes at all. The trajectory suggests that without urgent interventions, the demographic of first-time buyers could shrink further, leading to significant economic repercussions.
Despite improvements in residential construction—evidenced by a 2.7% increase in single-family housing starts in September—Selma Hepp, chief economist at CoreLogic, expresses skepticism about the long-term outlook for affordability. The overall housing market remains constrained, maintaining immense upward pressure on prices. For instance, as of August 2023, the price of a typical starter home rose to $250,000, up from $240,000 the previous year, thereby restricting access for new buyers.
Cash Buyers and Home Equity Dynamics
Interestingly, the dynamics of the current housing market are heavily influenced by repeat buyers. These individuals typically possess prior home equity, which provides them with a significant advantage over first-time buyers. Approximately 26% of home purchases are made in cash, representing an all-time high and further sidelining younger buyers who rely on financing options.
Moreover, homeowners with mortgages saw their collective equity multipled to over $17.6 trillion in the second quarter of 2024, showing an increase of $1.3 trillion from the previous year—a clear sign of economic disparity between modes of ownership. As Lautz emphasizes, older, repeat buyers, often averaging 61 years old, benefit from home equity that younger buyers simply do not possess.
Rental Affordability and Its Impact on Home Buying
The story of homeownership also intersects with the demanding rental market. Rising rent prices have outpaced wage growth, exacerbating the financial burden on potential buyers. During the peak of the Covid-19 pandemic, rental prices surged by 16%, whereas wages increased only by 9.3%. Consequently, renters have found themselves trapped in a cycle of cost burdens, as half of all renter households now spend over 30% of their income on housing—a statistic that severely limits their savings potential for home buying.
The pressure of high rental prices not only inhibits prospective buyers from saving but also impacts their ability to manage existing debts, such as student loans. This difficulty in maintaining a favorable debt-to-income (DTI) ratio becomes significant during the mortgage qualification process, as lenders evaluate whether applicants can handle additional loan obligations. Lautz succinctly summarizes the dilemma: “All of these things snowball, especially in an inflationary environment.”
As the market evolves, it is evident that the path to homeownership has transformed dramatically, with an emphasis on the growing challenges faced by first-time buyers. While there are indications of a slight uptick in housing starts, experts warn that without substantial changes in policy and market dynamics, young adults may find themselves continually locked out of homeownership. As the consequences of delayed entry into the housing market mount, it becomes increasingly critical to address these profound issues—addressing the threats posed not only to youth but to the long-term economic health of the country as a whole.