A cornerstone of the American dream is drifting out of reach.
The estimated number of first-time homebuyers in the US dropped to a little more than 1.1 million in 2024, according to data from the National Association of Realtors shared with the Guardian: the lowest level since the NAR started tracking new buyers, in 1989.
Economic instability is keeping the housing market at a standstill, with the number of new home owners at its lowest point in three decades. How did we get here?
Home prices and mortgage rates remain high years after the peak pandemic housing boom. It’s unclear when relief will come – and as Donald Trump’s erratic policies on trade and the economy heightens uncertainty, economists fear the consequences may be felt for a generation.
For young Americans, holding off on buying a home has become the new norm. Last year, the average age of a first-time homebuyer was 38 years old, a record high, according to the NAR. In the 1980s, the average was in the late 20s.
Buying a home later in life typically has ripple effects, according to Daryl Fairweather, chief economist at Redfin.
“It probably means they’re going to be retiring later, because when you buy a home, you’re setting up for a 30-year-mortgage,” she said. “People are finding that they’re going to have to work longer basically to achieve these goals.”
The highs and lows of the property market are closely tied to interest rates set by the US Federal Reserve. Interest rates currently sit between 4.25% to 4.5%, about 1% lower than they were this time last year. But mortgage rates are still above 6.5%, nearly double what they were five years ago.
The housing market has felt the strain, with high mortgage rates suppressing the number of people able to buy their first homes.
Typically, when demand drops, prices follow. But even when the number of buyers dropped, prices kept climbing. The median price of a single-family home hit record highs in 2024, and has only continued going up. In May, the median price was $427,800 – up from $357,100 in 2021, when home prices started to climb.
At today’s prices, a family would need to earn $126,700 a year to afford monthly payments on an average home purchased in 2024, up from $79,300 annually in 2021, according to a report from the Harvard Joint Center for Housing Studies.
Economists say a historically low inventory of existing homes, coupled with sluggish new construction, is keeping prices high.
And potential new homeowners are faced with a dilemma: renting is now significantly cheaper than buying. Analysis from John Burns Research and Consulting found that buying an entry-level home now costs twice as much as renting an apartment, for the first time since 2006.
That’s made the current housing market difficult for both buyers and sellers. And sellers are increasingly struggling to find buyers willing to take on higher mortgage rates.
Given interest rates’ impact on the housing market, Trump has repeatedly demanded that the Fed lower them. “You have cost the USA a fortune and continue to do so,” Trump told the central bank’s chair, Jerome Powell, in a handwritten note.
But Powell and other Fed officials argue that Trump’s tariffs have created ongoing economic uncertainty, especially around prices. Some consumers say they’ve already seen prices rise, and cutting rates risks fueling more inflation.
“It’s a risk we feel. As the people who are supposed to keep stable prices, we need to manage that risk,” Powell told the US Senate last month.
Few expect marked improvements in the housing market anytime soon. Economists say caution from the Fed will continue to affect the housing market.
Buyers, including existing homeowners, are “waiting for interest rates to drop or for prices to correct”, said Fairweather of Redfin. “What we’re hearing is that the overall economic uncertainty makes people not want to commit to a mortgage right now.”