The high cost of mortgages and the difficulty of saving money are just some of the obstacles preventing many from achieving the dream of owning a home.
Americans are facing one of the most challenging real estate markets in decades, and for a significant portion of the younger generation, the prospect of buying a home is becoming increasingly distant.
In recent years, mortgage rates have risen, reaching their highest levels in over 20 years last fall. While rates have slightly declined since then, home prices remain incredibly high, and the limited housing supply still fails to meet demand.
These conditions have made housing virtually unattainable for many.
Although the recent dip in mortgage rates has provided some relief, property prices may remain stubbornly high, according to economists. This is still not an ideal time to house hunt, but for young first-time buyers, it is even more challenging as they need to save for a down payment and improve their credit scores—all while Baby Boomers are reluctant to part with their larger properties.
The situation isn’t much better for renters, as rents have barely dropped from record levels, with half of renters in this market stating they can’t even afford their monthly payments.
Surveys and polls have detected growing concern about the affordability crisis in the U.S., but data specifically focusing on young people’s views are scarce.
Brandie Grant, 35, lives in the San Francisco Bay Area, one of the country’s most expensive real estate markets. Despite facing financial hardships, she persisted and earned a bachelor’s degree, now working as a senior consultant at an academic publishing company with an annual salary of $76,000. Yet, Grant revealed she can barely cover her monthly expenses.
After paying all her bills each month, including $500 toward student debt exceeding $90,000, Grant said she can’t save enough for a down payment on a house.
“I’m extremely exhausted. Having children will never be an option. I haven’t saved a single penny for my retirement, so I see no hope of ever owning my own home,” she lamented.
The minimum down payment required to purchase a home varies based on several factors, including the type of mortgage chosen, the buyer’s credit score, and the property’s sale price.
While the conventional recommendation is for prospective buyers to save 20% for a down payment before house hunting, this goal is unattainable for those struggling even to save initially.
However, the typical down payment for a first-time buyer tends to be much lower—around 6% last year, according to data from the National Association of Realtors.
For those opting for a Federal Housing Administration loan, government-backed, the down payment can be as low as 3.5%. Even so, saving this amount can be a daunting task.
According to Zillow, the average time it takes for a typical U.S. homebuyer to save for the average down payment on a home is about nine years.
For some young people, the best option is living with their parents, given the current inaccessibility of housing for many.
In 2023, over half of American adults aged 18–24 lived with their parents. This is the reality for Corey Griffis, 24, who resides in his parents’ home in Portland, Oregon.
He graduated in history last year from Montana State University but said he’s had no luck finding a job. In addition to not yet having the financial stability of full-time employment, he said he doesn’t see homeownership as a possibility unless he finds a partner first.
“Having two income streams does a lot for you, and I can’t imagine owning a home until I have a partner,” Griffis said.
When a regional housing market becomes too unaffordable, it’s common for those without resources to simply move to a cheaper location, such as a suburb an hour away.
Another option, though less common, is relocating to a completely different country.
Shyahm Aguilar, 37, is a naturalized U.S. citizen who immigrated from Mexico as a child in the 1980s. He currently works at a hotel in Santa Fe, New Mexico—the state’s most expensive market—and lives in a rented single-family home with his sister and her three daughters.
Aguilar said he doesn’t see homeownership in Santa Fe as “a reality within the next 10 years,” but he is considering relocating to Mérida, Mexico, in 2025 to open a laundromat with his business partner, who is currently working in Colorado.
“Washers and dryers aren’t that expensive in Mexico, and we’ve already analyzed the costs of opening a laundromat, which would be around $10,000,” Aguilar explained.
He continued, saying he could “use that money to start a business there. Here, that’s not even enough for a down payment on a house.”
High mortgage rates are one of the main reasons some people feel so discouraged about the U.S. housing market. However, there has been some good news lately.
The Federal Reserve has indicated it will soon lower interest rates now that decades-high inflation has eased. This change will impact the average 30-year fixed mortgage rate, although economists doubt rates will drop below 6% this year.
The prospect of lower monthly mortgage payments is already improving Americans’ attitudes toward the housing market, according to the latest National Housing Survey by Fannie Mae, released last month.
“Homeowners have repeatedly told us that high mortgage rates are the primary reason it’s a bad time to buy or sell a home. Therefore, a more positive outlook on mortgage rates could encourage some to list their properties, helping increase the supply of existing homes in the new year,” Mark Palim, vice president and deputy chief economist at Fannie Mae, said in a statement.
However, affordability remains a concern when considering mortgage rates, household income, and single-family home prices.
According to the National Association of Realtors, the median home sale price in 2023 was $389,800, representing a 1% increase from 2022 and marking the highest recorded value.
Lower mortgage rates could certainly improve affordability, but more effective zoning laws could have a more lasting impact.
“Daryl Fairweather, Redfin’s chief economist, emphasizes that the sustainable solution lies in making it easier to build housing. This way, we can truly make progress in the right direction regarding affordability and ensure it’s sustainable—not just a short-term phenomenon tied to interest rates,” he told CNN.
Fairweather offers some tips for young first-time buyers:
- Keep saving this year to be ready when housing conditions improve further in 2025;
- Invest money in a fund, taking advantage of the stock market’s current good performance;
- Be realistic about the neighborhoods you can consider living in;
- Explore more affordable housing options, like condominiums or city homes.
Sofiya Vyshnevska, chief operating officer of NewHomesMate, highlights that newly built homes could be a viable option for first-time buyers.
This is because some builders are offering incentives for closing costs, such as a 2-1 buydown—a type of financing that lowers interest rates for the first two years before adjusting to the permanent rate.
Vyshnevska notes that these offers are becoming more common in cities that have seen a rise in residential construction in recent years, such as Minneapolis, Houston, Dallas, Austin (Texas), Tampa, Jacksonville, and Orlando (Florida), Atlanta, and Phoenix.
“She also points out that young first-time homebuyers are often unaware of these opportunities since there’s no centralized place to view all these incentives. Therefore, reaching out directly to the builder to explore these options could be a good choice,” she added.
