(DailyEmailNews.com) – The U.S. housing market has shifted significantly as older buyers now hold the upper hand – the average homebuyer age increased to 56, reflecting this demographic shift.
As older homeowners dominate the U.S. real estate market with cash offers, first-time buyers face overwhelming obstacles.
This widening gap in home-buying power raises significant concerns about accessibility and broader economic disparities.
With the market favoring those who can make cash offers, younger buyers, struggling to secure financing, are being priced out.
The median age for first-time buyers has risen to 38, showcasing the increased difficulty for younger generations entering the market.
First-time buyer shares have dropped to 24%, a record low since 1981.
Rising costs have significantly hindered their ability to purchase, with the median U.S. home price at $435,000, up by 39% since 2020, Fast Company notes in a report.
Mortgage rates exacerbate the problem, as the average 30-year fixed rate has soared over 6%, doubling in recent years.
Young buyers face challenges like saving for a down payment amid student loan debt and high rent.
The average down payment on a $435,000 home is $78,300, nearly as much as the median U.S. household income.
“Homebuying for the younger generation is wildly unaffordable,” commented Noah Damsky, a chartered financial analyst and principal at Marina Wealth Advisors, cited by CNBC.
Many young buyers find themselves outbid by older, wealthier buyers using the equity from existing homes.
The share of all-cash buyers has jumped from 20% to 26%. Around a quarter of first-time buyers need financial aid from family for down payments.
This situation forces millennials like Kelcie Lesko and Tim Khalil to forgo homeownership dreams after losing multiple bids.
Paying for a home is increasingly difficult for millennials, despite following conventional financial wisdom.
House prices have grown twice as much as incomes, leaving middle-class families struggling to afford homes.
Today, the median home price is 5.8 times the median annual income, a stark rise since 1990 when it was only twice the income.
There are now 4 million fewer homes than needed, contributing to rising prices. The construction rate is alarmingly below pre-2009 levels.
Emotional factors continue to drive homebuying decisions, yet many homeowners regret their purchases due to unforeseen costs. Experts suggest investing over buying given current conditions.
“In my two decades in the mortgage business, I’ve never seen a more difficult time for millennials to purchase a home,” says Bob Driscoll, senior vice president and director of residential lending at Massachusetts-based bank Rockland Trust.
The market is expected to see a 15% to 25% rise in home prices over the next five years due to supply-demand imbalances.
Unless addressed, this trend will further widen the economic chasm between generations and challenge younger Americans’ pursuit of the American Dream.
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