The affordability crisis is causing some young Americans to give up on owning a home

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Americans are in the toughest housing market in a generation, and for some young people, the quintessential dream of owning a home is fading.

Mortgage rates have risen in recent years Recording its highest levels in more than two decades last fall. Although prices have fallen slightly since then, home prices are still holding up Painfully high The limited housing stock is still unable to keep up with demand. Such conditions mean that housing has become completely unaffordable.

Lower mortgage rates have helped in recent weeks, but home prices may remain flat, according to economists. It’s still a tough time to look for a home, but it’s even worse for young, first-time buyers who need to save for a down payment and build their credit score during a time when baby boomers He refused to give up their big homes.

The situation isn’t much better for renters, as rents have barely fallen from record levels, say half of renters in this market They can’t even afford their payments.

Unease about America’s affordability crisis is evident in surveys and opinion polls, but data identifying sentiment specifically among young people is limited.

CNN spoke with some young Americans about their thoughts on the current state of the US housing market and their plans for the future.

Survival is the priority, not saving for a down payment or even having children

Brandy Grant, 35, lives in the San Francisco Bay Area, one of the most expensive housing markets in the country. Despite her difficult upbringing, she pushed herself to graduate from college with a bachelor’s degree and now earns $76,000 a year as a senior consultant for an academic publishing company, but she said she barely makes ends meet.

After paying all of her bills each month, including $500 toward more than $90,000 in student debt, Grant said she didn’t have enough to save for a down payment.

“I’m so tired,” she said. “Having children will never be on the table. I haven’t even put a dime into my retirement fund, so there’s no hope for me of ever owning a house.”

Brandi Grant. – Courtesy Brandi Grant

The minimum down payment required to purchase a home depends on various factors, such as the type of mortgage being obtained, the credit score of the potential home buyer, and the asking price of the property. Conventional wisdom is that hopeful buyers should save 20% before shopping, but doing so is a pipe dream for those who can’t even save to begin with.

But the typical down payment for a first-time home buyer is usually much lower: 6% last year, according to the National Association of Realtors. A government-backed FHA loan requires a down payment of up to 3.5%. But even saving that much money can be daunting.

It takes nine years for the typical homebuyer to save up for the average down payment for a median-valued home in the United States, according to Zillow data.

Ross and Emily Bunton.  - Courtesy Ross Ponton

Ross and Emily Bunton. – Courtesy Ross Ponton

Making the down payment was also difficult for Ross Ponton, a 26-year-old case manager who lives with his wife in St. Louis, Missouri. He said this was mostly due to a combination of the cost of his rent and expensive medical bills, which eat up a large portion of the couple’s monthly budget.

He told CNN that their current financial situation means having children anytime soon is out of the question.

“I haven’t really been able to save money over the past year,” Ponton said. “I don’t think buying a house is very realistic for me even within the next couple of years, so I’m not really thinking about it at the moment, and if my wife and I had kids, we would definitely want to.” Be financially comfortable or able to do so. So, I also don’t see that as realistic.

Stay with parents, leave the country

For some, living with parents is the best option, and this certainly seems to be the case nowadays as housing affordability is out of reach for many young people.

More than half of adults in the United States are between the ages of 18 and 24 They lived with their parents in 2023. That was the reality for Corey Griffis, 24, who lives at his parents’ house in Portland, Oregon.

Corey Griffis.  - Courtesy Corey Griffis

Corey Griffis. – Courtesy Corey Griffis

He earned a master’s degree in history last year from Montana State University, but said he had no luck finding a job. Aside from not having the financial stability to work full-time yet, he said he doesn’t find it possible to one day own a home unless he finds a partner first.

“Having two income streams helps you a lot, and I can’t imagine owning a home until I’m partnered with someone,” Griffis said. “The housing market is not a one-person market.”

What usually happens when a regional housing market becomes too unaffordable is that people without the means simply move to a cheaper place, like a suburb an hour away, for example. A less common option is to move to a completely different country.

Shyam Aguilar, 37, is a naturalized U.S. citizen who came to the country from Mexico as a child in the 1980s. He currently works at a hotel in Santa Fe, New Mexico, the most expensive market in the state, and lives in a rented single-family home with his sister and her three daughters.

Aguilar said he doesn’t think owning a home in Santa Fe will be “a reality in the next 10 years,” but moving to Mérida, Mexico sometime in 2025 to start a laundry business with his partner, who currently works in Colorado, might be a much better bet.

“Washers and dryers are not expensive in Mexico, and we actually looked into the starting price of a Lavanderia plant [laundromat]“Which would be like $10,000,” Aguilar said. “I can take this money to open a business there. Here, it is not even enough as a down payment for a house.

Data, forecasts and solutions

High mortgage rates are a big reason why some people are spooked by America’s housing market. But there has been some good news recently.

The Federal Reserve has indicated this Interest rates will be lowered soon Now that the inflation rate, which has been high for decades, has declined. Such a move would affect the average interest rate on 30-year fixed mortgages, although economists say they doubt interest rates will fall below 6% this year.

The prospect of lower monthly mortgage payments has improved Americans’ attitudes toward the housing market, according to Fannie Mae’s latest national housing survey, released last month.

“Homeowners have repeatedly told us lately that high mortgage rates are the main reason it’s a bad time to buy and sell a home, so a more positive outlook for mortgage rates may… [incentivize] “Some are listing their homes for sale, helping to increase the supply of existing homes in the new year,” Mark Ballem, vice president and deputy chief economist at Fannie Mae, said in a statement.

However, affordability takes into account mortgage rates, household income, and single-family home prices, which remains a nagging pain point. the Average home sale price 2023 It was $389,800, according to NAR, up about 1% from 2022 and the highest ever. Lower mortgage rates would improve affordability, but better zoning laws could have a more lasting impact.

A person works on a roof during construction of a new home in a residential project on the outskirts of Phoenix on June 9, 2023 in Queen Creek, Arizona.  - Mario Tama/Getty Images

A person works on a roof during construction of a new home in a residential project on the outskirts of Phoenix on June 9, 2023 in Queen Creek, Arizona. – Mario Tama/Getty Images

“The sustainable solution is to make it easier to build housing. That way we can really start to go in the right direction with affordability and make that sustainable and not just a short-term interest rate phenomenon,” Daryl Fairweather, chief economist at Redfin, told CNN.

Fairweather’s tips for young, first-time buyers: Continue saving this year until housing conditions improve further in 2025, and invest some money in an index fund as the stock market Currently going strong; Be realistic about the neighborhoods you should live in; And consider other affordable housing options, such as an apartment or townhouse.

Newly built homes may be a viable option for first-time buyers because some homebuilders are offering incentives to cover closing costs, such as a 2-1 buyout, a type of financing that lowers the interest rate for the first two years before closing, said Sofia Vishnevska, chief operating officer of NewHomesMate. It rises to the permanent normal rate.

Vishnevska said such deals are becoming more common in cities that have ramped up residential construction in recent years, such as Minneapolis. Houston; Dallas. Austin, Texas; Tampa, Jacksonville, and Orlando in Florida; Atlanta and Phoenix.

“Young first-time homebuyers usually don’t know about this because there’s not one place where they can see all of these incentives, so reaching out to the builder directly to close the deal is a good option,” she said.

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