US housing affordability hits record low

ising prices have made it increasingly difficult for first-time buyers to enter the market almost everywhere, pushing many millennials to delay purchasing a home.

Even with a recent dip in mortgage rates, record-high prices and limited inventory have left affordability out of reach for many. “This is holding back first-time home buyers from entering the market,” said Lawrence Yun, chief economist of the National Association of Realtors (NAR).

Affordability at Historic Lows
According to NAR’s 2024 report, the median age of first-time homeowners has climbed to 38 years old, the highest on record. In the 1980s, most first-time buyers were in their late 20s. Today, they account for only 24% of purchases, the lowest share ever recorded.

Still, younger generations have not abandoned the dream. “Millennials and Gen Z still believe in homeownership as a way to build wealth and a major life accomplishment,” said Matt Vernon, head of consumer lending at Bank of America. “It’s just taking longer for them.”

Mortgage Rates Add Pressure
Mortgage rates remain another obstacle. While they’ve retreated to their lowest level since October, the average 30-year fixed rate is still just above 6.5%, far higher than the sub-3% levels seen during the pandemic, according to Freddie Mac.

“The American consumer has gotten very used to the low-rate environment that lasted for more than a decade,” Vernon said.

Bank of America’s latest homebuyer insights study found that 60% of homeowners and prospective buyers — the highest in three years — are uncertain about whether now is the right time to purchase.

“Not knowing if rates will go down or up is adding to the uncertainty in the marketplace,” Vernon added.