Due to the continuously rising cost of owning a home, the average age of American homebuyers has increased by nearly 7 years in just over a year, which means that young people are being squeezed out of this unattainable market.
The annual market report released by the National Association of Realtors (NAR) on Monday shows that the average age of American homebuyers has jumped to 56 years old, compared to 49 years old last year. Undoubtedly, this data has set a new historical high, far exceeding the average age of around 40 years old more than 10 years ago.
In the year ending July 2024, the median age of first-time homebuyers increased from 35 to 38 years old, while the proportion of first-time homebuyers decreased from 32% to 24%, the lowest proportion since NAR began tracking this data.
NAR Deputy Chief Economist Jessica Lautz pointed out that there is a phenomenon of differentiation in the current real estate market: traditional first-time homebuyers, such as middle-income teachers or emergency responders, are increasingly unable to afford this expense due to high housing prices and down payment requirements. The first-time homebuyers who are able to enter the market are usually a few who have higher incomes or already possess some wealth.
Bob Driscoll, Senior Vice President and Head of Residential Loans at Rockland Trust Bank in Massachusetts, said, "In my 20 years in the mortgage business, I have never seen millennials face such difficulties in buying a house
Driscoll believes that this is largely due to the high cost of owning a home. Currently, the median housing price in the United States is $435000, up 39% since 2020, while the average 30-year fixed mortgage rate has more than doubled to over 6% during the same period.
For young homebuyers, the high cost of buying a house is particularly challenging, as many are struggling to save money to pay the down payment while also dealing with student loan debt and high rent. In addition, the salary level of young people is relatively low, and it is not easy to save enough for the down payment.
According to NAR's data, a house worth $435000 has an average down payment of $78300 for 18%. This is a considerable expense, close to the average annual income of American households.
Therefore, it is not surprising that a quarter of first-time homebuyers rely on gifts or loans from relatives or friends to pay the down payment.
Chartered financial analyst Noah Damsky said, "The cost of buying a house for the younger generation is outrageously high. Without a super high income, saving up for a down payment is a challenge, which is evident in the data. Moreover, middle-income typically only covers basic living needs, which is why having higher income or savings is crucial for becoming a homeowner
The problem of housing affordability has forced Americans to try new ways of living. According to the survey, the lifestyle of several generations is becoming more and more popular, reaching a record 17% last year.