A first-time home buyer in 2021 would have needed an annual income of $79,000 to afford the monthly mortgage payment on a median-priced home, but in 2025 the needed income jumped to $127,000 for the same median-priced home. Home ownership, a key part of the “American Dream,” is out of reach for an increasing number of Americans. The number of first-time home buyers is currently about 1.1 million per year, which is about half of the historic norm.
The segment of the market which is traditionally dominated by first-time buyers (properties below $500,000) has seen the sharpest drop, but all home sales are down. This year total home sales are expected to be around 4 million units, the lowest number since 1995. Just in May the sale of newly built homes was 6% lower than May of last year. In order to boost sales of new large homes, builders are often giving significant discounts or are offering other perks, such as a free jacuzzi.
Meanwhile the number of renter households in the U.S. has reached a record 46 million. This includes an estimated 1.2 million “trapped renters,” who have the means and desire to own a home, but are waiting for more favorable market conditions. Gen Z and millennial Americans have lower rates of home ownership than baby boomers did at the same stage of life, so many of them may also want to join the market if given a chance. However, a growing difficulty for younger people entering the housing market is the jump in delinquent student loans from 1% last quarter to 8% this quarter, as a pandemic-era reprieve ended last Fall, and, as recently reported in the morning briefing, the Trump administration is tightening the screws on past-due or defaulted loans.
