Every home seems to be out of budget for new buyers
The Future. Thanks to skyrocketing prices, a shortage of inventory, and competition from investors with all-cash offers, it’s becoming harder than ever for young people to buy their first homes. And with unaffordability reaching a four-decade high, many people may turn to more communal home-buying options to have their slice of the American Dream.
The mythical mortgage
Here are some of the forces making buying a starter home so frustrating.
- The National Association of Realtors reports that first-time buyers were only behind 26% of sales last year.
- The average age of first-time buyers has jumped from 29 in 1981 to 36 in 2022.
- They’ll also need a household income of about $90,000 (good luck with that in California) — especially as interest rates are staying high at about 6.65%.
- According to Zillow, it would take an individual ten years of saving 5% of their median household income to afford a typical home.
Nicole Bachaud, a senior economist at Zillow, said that “this will be the norm until we get more inventory in the market.” The supply of the typical starter home was down 1.5% in January, while it spiked 37% for McMansions.
Your parents’ roof
With the price of homes far “outpacing” wages, according to Zillow chief economist Skylar Olsen, many people have had to turn to mom and dad to become owners.
- In 2021, about 40% of first-time buyers relied on a gift or loan from family or friends for at least part of their down payment — certainly a higher percentage now.
- Freddie Mac says that young buyers with a co-borrower over the age of 55 are also way up in recent years.
And in big cities all across America, the stats are even direr. Real estate agent Connie Segovia said that at least half of young buyers in Dallas are getting help from their families — mostly the entirety of their down payment.
That’s just not sustainable.