For first-time home buyers, these challenges create daunting barriers in the competitive housing market. Yet they are faced with skyrocketing prices and lack of available housing. Here’s the big ones, according to chief economist Lawrence Yun of the National Association of Realtors. These problems are definitely preventing qualified prospective homebuyers from closing transactions. The median age of first-time homebuyers has recently reached a record high of 38 years. This is a remarkable change from the late 20s that was the norm for homebuyers in the 1980s. Today, first-time buyers make up only 24% of the market, their smallest share on record.
The current experience in New York City is a microcosm of the barrier private buyers face. As demand has surged, the state’s capital city’s typical listing price has risen over $829,000—up 3.8% year-over-year. New York had the largest annual increase of any major U.S. city. In May, the city experienced an incredible 7.4% increase year-over-year.
Ashley Weeks, a wealth strategist at TD Wealth, said the unpredictable nature of the mortgage market was one of the top worries. She noted that even if the central bank lowers rates, there is “no guarantee that mortgage rates are going to fall and make housing more affordable.” This ambiguity increases in depth as mortgage rates tend to closely track the 10-year Treasury yield. Given this connection, it’s possible that rates may remain low or even increase, regardless of any actions taken by the Federal Reserve.
Matt Vernon, head of consumer lending at Bank of America, understands that Millennials and Gen Z buyers are newly realizing the American dream of homeownership. They consider it to be the most important means of creating wealth and attaining their plans for life. He further explained that the greatest source of uncertainty in the marketplace is not knowing if rates are going to go up or down. That uncertainty is creating untenable challenges for all parties—large and small.
Survey and anecdotal evidence point to a very high degree of hesitation among would-be homebuyers. In fact, according to one recent poll, over half—51%—of Americans wouldn’t buy a home this year if you gave it to them at any rate. This seems to mark a new trend of only committing to such a large capital expenditure after waiting for improved circumstances.
Lorene Cowan, a business and life coach, expressed her aspirations for homeownership, stating, “I would love to buy a home, that’s the next step.” Yet, she is the face for many who feel stuck by today’s unfavorable market environment.