Young Americans are finding it harder to buy their own homes due to rising costs and rising mortgage rates.
For many, the dream of home ownership is becoming more distant, and the trend is not only for families but also for President Joe Biden’s re-election campaign.
Millennials, who were the most active homebuyers from 2014 to 2022, have lost their top spot to Baby Boomers, who can afford to buy a home outright. The housing market in particular is facing a severe shortage of affordable options and high interest rates are putting more pressure on the younger generation.
Adding to the financial stress is the resumption of student loan payments in October after a hiatus during the pandemic. For many first-time buyers, moving directly from their family home into home ownership has become more common, to levels not seen since the 1980s. These first-time buyers are also getting older, with the average age now being 36.
The situation has led to a slowdown in existing home sales, which have fallen to their lowest rate since January. U.S. mortgage rates hit a two-decade high in August, reaching an average of 7.2 percent for a 30-year fixed-rate mortgage. The median sales price for homes remains high, making it even more difficult for home buyers.
As housing prices rise, buyers are turning to neighboring markets, driving up prices. In areas like New York, the “American Dream” of a four-bedroom family home is becoming unattainable. A house in the Philadelphia suburbs that sold for the mid-$400,000s before the pandemic now goes for $600,000 or more.
While some experts predict housing prices will decline, the U.S. still faces a shortage of about 5.5 million homes. To combat this problem, consideration is being given to converting vacant office buildings into residential spaces. However, these trends are deepening the wealth gap and housing inequality, affecting younger buyers with limited resources and fewer opportunities for black and Hispanic buyers to enter the market.
These challenges not only affect families but also contribute to housing and wealth inequality, a growing concern for policymakers.
