The dream of homeownership is fading for millions of Americans.
Figures from the National Association of Realtors (NAR) show that only 24% of housing sales last year were by first-time homebuyers — that’s down from 50% in 2010. The typical purchaser is also older than in the past, with an average age of 38, or about 10 years above historical norms.
Such trends reflect the challenges of climbing on the property ladder as home prices hover near record highs, inventory remains low and with mortgage rates at their highest level 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,” NAR deputy chief economist Jessica Lautz told CBS MoneyWatch.
Opportunity missed
Americans who are shut out from buying their first homes miss out on an opportunity to build wealth through homeownership, Lautz said.
“It’s their biggest asset, and with the delay into homeownership first-time homebuyers are losing about 10 years of housing wealth. And that’s for those who can enter into the market,” she said. “For those who can’t, they lose out on housing wealth by not having that as the biggest asset in their nest egg.”
Only about 1 in 5 listed homes in March were affordable for households with $75,000 in annual income, according to a NAR analysis of property listings. Today, a household with annual income of $50,000 can only afford 8.7% of listings, down from 9.4% a year ago, according to the data.
“The lack of homes, especially at affordable price points where they would be entering the market, has been plaguing first-time homebuyers for the last several years,” Lautz said. “It’s been a continual issue, especially with interest rates. It makes the cost of homeownership quite high.”
Along with inadequate construction of affordable housing, many existing homeowners are reluctant to sell their properties given their lower mortgage rates.
“People who are homeowners have no motivational factors to move, so that’s not freeing up inventory,” Lautz said. “It’s almost created a hoarding situation for those in low-interest rate mortgages who don’t want to separate from them.”
Financial squeeze
Other factors are making it hard for people to buy a first home. The high cost of rent gets in the way of saving for a down payment, while credit card debt, car loans and child care costs also hold first-time homebuyers back. More recently, meanwhile, the resumption of student loan payments is putting many people under financial pressure.
Some Americans are managing to save enough for a first home by temporarily moving in with family or friends to minimize the cost of rent, Lautz said. But that approach isn’t viable for everyone.
“It has been a pathway to ownership for some. But for someone who is 38-years-old, moving in with mom and dad can get uncomfortable,” she said. “For an older homebuyer, that might be less attractive for everyone involved.”
Megan Cerullo is a New York-based reporter for CBS MoneyWatch covering small business, workplace, health care, consumer spending and personal finance topics. She regularly appears on CBS News 24/7 to discuss her reporting.
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