The American housing market continues to present daunting challenges for prospective homebuyers, particularly first-time buyers and renters. According to a recent survey by NerdWallet, only 28% of individuals who planned to purchase a home in 2024 succeeded in doing so. The primary hurdle is the scarcity of available homes, as highlighted by Holden Lewis, a mortgage expert at NerdWallet. Rising home prices and increasing mortgage rates compound these challenges, creating a difficult environment for those looking to enter the housing market.
Market data paints a challenging picture for potential buyers. The national median sales price of a home stands at $420,400, as reported by recent U.S. Census data. However, survey respondents indicated an average budget of $150,000, significantly below the median sales price. This discrepancy underscores the financial constraints facing many would-be buyers. Rising home prices, cited by 18% of respondents as their biggest challenge, have surged by 33% since 2020, while mortgage rates have doubled to over 6% since the same year.
"The biggest issue is that not enough homes are for sale," – Holden Lewis
Renters, in particular, face significant obstacles in transitioning to homeownership. MaryAnne Gucciardi notes that these individuals often "face escalating costs that often leave little room for discretionary savings, making it harder to accumulate the funds needed for a down payment." In contrast, current homeowners benefit from equity gains and locked-in lower mortgage rates, shielding them from similar financial pressures.
First-time buyers are experiencing an especially tough time in the current market. Last year, they constituted just 24% of home purchases, marking the smallest share since 1981. Andrew Herzog, a certified financial planner in Texas, observes that millennials are among the groups feeling "trapped between a rock and a hard place" due to these market conditions.
"I have worked with millennials who feel trapped between a rock and a hard place," – Andrew Herzog
The year 2024 was notably subdued for home sales, largely due to affordability issues highlighted by National Association of Realtors (NAR) data. The combination of limited housing inventory and soaring costs has led many Americans to set budgets far below what is feasible in today's market. While some hold out hope for more favorable mortgage rates, experts caution that rates are unlikely to return to the lows of around 3% seen in previous years.
"In contrast, homeowners benefit from equity and locked-in, lower mortgage rates, which shield them from similar challenges," – MaryAnne Gucciardi