Young Adults Struggle to Enter Homeownership Market Amid Rising Costs and Debt
Young Americans are facing unprecedented challenges in achieving homeownership, a cornerstone of financial stability and long-term wealth. High home prices, soaring mortgage rates, and a historically low inventory of homes have created significant roadblocks for first-time buyers, according to new data from the National Association of Realtors (NAR).
Despite Millennials (ages 26 to 44 in 2023) representing the largest generation in American history—nearly 86 million people—their homeownership rates remain strikingly low compared to previous generations. This growing gap underscores a troubling trend: young adults today are not only buying homes later in life but are also making up a smaller portion of total homebuyers than ever before.
Historic Declines in First-Time Homebuyer Rates
The share of first-time homebuyers has plummeted to 24% in 2023, far below the historical average of 40% recorded since 1981. Compounding this issue, the median age of first-time buyers has climbed to 38—the oldest age since NAR began tracking this data over four decades ago. Historically, first-time buyers were typically between the ages of 28 and 33. This decade-long delay means younger generations are missing out on crucial years of home equity growth, potentially limiting long-term wealth accumulation.
Moreover, buying a home later in life may lead to fewer moves overall. Many of today’s first-time buyers are bypassing traditional starter homes and purchasing properties that can meet their long-term needs, altering the typical path of homeownership progression.
Housing Market Challenges: High Prices and Low Inventory
Persistent affordability issues are at the heart of this crisis. In the past year, mortgage rates soared to their highest levels in two decades, significantly impacting purchasing power. Meanwhile, in 90% of U.S. metro areas, home prices continue to rise, further straining first-time buyers.
Housing inventory, although slowly increasing, remains limited. This shortage puts additional pressure on prices and intensifies competition, making it harder for young buyers to find affordable homes.
Debt and Financial Barriers to Homeownership
For many young adults, managing debt has become a significant barrier to saving for a down payment. Among first-time buyers who reported difficulty saving:
49% cited high rent costs as their biggest obstacle.
40% pointed to burdensome student loan debt.
36% struggled with credit card debt.
33% were impacted by car loans.
These financial hurdles are compounded by a high-inflation environment, further limiting the ability of young adults to accumulate savings. Notably, 63% of first-time buyers reported making financial sacrifices—such as cutting discretionary spending or taking on second jobs—to afford a home.
Student loan debt has also returned as a pressing concern. Nearly one-third of first-time buyers in 2023 carried student loan debt, with federal loan repayments resuming in October 2023 after a pandemic-related pause. This added strain on household budgets makes saving for a home even more challenging.
Child care expenses, although affecting a smaller portion of buyers (11%), remain a significant burden. In 2023, annual child care costs ranged from $20,000 to $28,000 per child, depending on age and care type, posing another financial barrier for families seeking homeownership.
Declining Homeownership Rates for Younger Generations
Despite some positive trends in 2021 and 2022, the homeownership rate for adults under 35 declined again in 2023. Comparing historical data reveals a stark contrast: the average homeownership rate for Baby Boomers and Gen Xers under 35 was 39.7%, a milestone that Millennials and Gen Zers have yet to reach.
This generational gap suggests that today’s young adults are at risk of falling behind in wealth accumulation due to delayed or unattainable homeownership.
A Shifting Homebuyer Demographic
Interestingly, a subset of young, wealthy buyers is bucking this trend by making all-cash purchases or placing large down payments, bypassing many of the traditional obstacles faced by their peers. This emerging dynamic highlights growing inequality within younger generations, where high-income earners can access the housing market while others remain sidelined.
NAR plans to explore this trend in more detail in upcoming reports, shedding light on who these affluent young buyers are and how they are shaping the real estate landscape.
The Road Ahead
The path to homeownership for young Americans remains fraught with challenges. High costs, mounting debt, and limited housing supply continue to delay or derail the dreams of many first-time buyers. Without significant changes in housing affordability, supply, and financial policy, younger generations risk being permanently edged out of the housing market—a shift with long-term implications for wealth building and economic stability.
As the market evolves, policymakers and industry leaders face mounting pressure to address these systemic barriers and create pathways for young adults to achieve the American dream of homeownership.
