Young homebuyers are increasingly priced out of the housing market, as detailed in a November 4 report by the National Association of Realtors. The report highlights the impact of diminished housing affordability and scarce inventory on potential first-time buyers, significantly reducing their participation. The proportion of first-time homebuyers fell to a historic low of 21%, with their median age now reaching 40, a stark contrast to the late 20s median in the 1980s. Meanwhile, older repeat buyers, often with cash offers and substantial down payments, now dominate home sales.
States are attempting to assist first-time buyers through various programs. Florida provides mortgages and down payment assistance, while Michigan’s first-generation buyer program has already exhausted its funds. Utah’s Governor Spencer Cox has proposed zoning changes to develop 35,000 starter homes for first-time buyers, although similar initiatives have failed earlier this year. “I don’t want my grandkids to be in Indiana,” Cox remarked, referring to his son’s consideration of moving for affordable housing.
Neighborhood choice for buyers is increasingly influenced by factors other than proximity to work. According to the Realtors report, only 31% of buyers prioritize work location, down from 34% last year, despite more employers requiring office attendance. The top reasons include neighborhood quality (59%) and closeness to family and friends (47%).
The federal government shutdown may further complicate home purchases in flood zones by suspending new flood insurance contracts, impacting high-risk areas like Florida and North Carolina. Buyers might need to resort to more expensive private insurance options. Additionally, the cost of homeownership remains near record highs, with monthly payments for median-priced homes consuming nearly half of median household income as of August, according to the Federal Reserve Bank of Atlanta.
Home prices are rising fastest in the Midwest due to affordability and in the Northeast due to low supply. In contrast, Southern states like Florida and Texas have seen some price decreases due to new construction. Median sales prices vary widely, from $146,000 in Decatur, Illinois, to $2.1 million in Silicon Valley, California.
Efforts to aid homebuyers include New York State’s plan to build starter homes using manufactured components on nonprofit-owned land. California’s Dream For All program offers significant down payment assistance to first-time, first-generation buyers, though it’s currently closed to new applicants. The Federal Home Loan Bank of Cincinnati has expanded its program offering $25,000 for down payments to eligible buyers in Kentucky and Western Tennessee.
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