Owning a home is becoming a distant dream for younger Americans as soaring costs create hurdles in their path.
Rising interest rates, combined with the weight of student debt and childcare expenses, are making it increasingly tough for the younger generation to step onto the property ladder.
Jennie Luhmann, a 37-year-old in pursuit of her family’s “forever home,” faced a daunting scenario. Few homes were available, with competitors offering all-cash deals, while interest rates steadily climbed. Eventually, Luhmann and her husband decided to rent and temporarily move into her mother’s house.
The struggles faced by Luhmann aren’t hers alone. Younger Americans are finding it increasingly challenging to secure homeownership. President Joe Biden is grappling with negative sentiment about his economic stewardship, which adds to the complexity of the issue.
The Biden administration aims to address America’s housing shortage by reducing building barriers, but it’s not a quick fix. Millennials, born between the early 1980s and late 1990s, had been the dominant force in the housing market between 2014 and 2022, but this year, they’ve been overtaken by cash-ready baby boomers.
According to Jessica Lautz, the National Association of Realtors’ deputy chief economist, there’s an alarming shortage of affordable housing. Rising interest rates add to the woes of millennials, who also face mounting student loan debts.
First-time buyers are feeling the pinch, with 27 percent moving straight from their family homes into homeownership last year, the highest figure since the 1980s. Furthermore, the median age for first-time buyers has climbed to 36.
Existing home sales have cooled, sitting at their lowest point since January, as sellers wait for better rates. In August, US mortgage rates hit a 20-year high, with a 30-year fixed-rate mortgage averaging 7.2 percent.
Joan George, a New Jersey-based real estate agent, reveals that prices are soaring, especially in places like New York. What was once considered the “American dream” of owning a four-bedroom family house has become increasingly unattainable, with prices rising by hundreds of thousands of dollars.
Researchers at the Federal Reserve Bank of San Francisco believe there might be relief ahead, with a slowdown in asking rents and housing prices possibly cooling shelter inflation. However, there’s still a shortage of around 5.5 million US homes.
In a bid to address the housing crisis, some suggest converting vacant office buildings into residential spaces, but this trend exacerbates wealth gaps. Younger buyers are missing out on years of wealth accumulation through homeownership, and racial disparities persist in the housing market.
For many like Jennie Luhmann, the prospect of owning a home within the next year and a half seems bleak given the current market trends.
The dream of having a family and a place to call their own remains a distant reality for many younger Americans.