Renters Desperate to Buy Their First Homes, But Struggling to Make it Happen

Although most millennials who rent would like to own a home, they are not confident they will be able to do so in the near future.

First there was the pandemic housing frenzy, with bidding wars and cash offers dominating an under-supplied market. Then came interest rate hikes, which drove up borrowing costs and made it harder for many potential buyers to afford a mortgage. The Fed has managed to cool housing demand, but the supply of available properties is still low, making it difficult for many people to find a home they can afford.

Inflation has made it harder for people to save for a home, as the cost of living has increased for items such as groceries, utilities, and rent. This has made it difficult for people to keep up with the rising costs.

There are a number of factors holding back first-time home buyers, according to Jessica Lautz, deputy chief economist and vice president of research at the National Association of Realtors. These factors can compound on each other, making it difficult for potential buyers, many of whom are millennials, to enter the market. Some of the issues that kept buyers on the sidelines this year include:

The rise in borrowing costs has led to a slowdown in the housing market, but in many areas, prices have not dropped enough to make properties affordable for first-time buyers.

Kerry Tuttle, a public relations manager in Chicago, had to push back her timeline for purchasing a property. She and her partner had planned to buy a two-bedroom apartment at the end of their last lease and had saved $35,000 for a down payment. But the properties in her price range were of worse quality than she had expected.

"I realized that I would get less value for my money if I bought in this market," she said.

The additional costs of homeowners association dues and taxes meant that apartments that cost less than $350,000 were out of her budget. Instead, the couple rented a larger apartment and are now weighing whether to prioritize getting married.

The median sale price for a home in the Chicago area in November was $310,000, down from a high of $372,750 in April but still nearly 20% higher than five years ago, according to Redfin. The online brokerage recently predicted that Chicago's housing market would remain largely steady in 2023.

Saving for a home can be daunting when the cost of living is increasing and wages are not keeping up with inflation. However, there are ways to save for a home even on a tight budget. By setting aside a little each month, you can slowly but surely build up a down payment for your dream home.

"My main focus right now is to make ends meet without having to dip into my savings before my next paycheck," said Amelia Garrison, a senior recruitment manager for a non-profit in Columbus, Ohio. "Unfortunately, this is something I can rarely manage to do."

President Joe Biden's student debt forgiveness plan is facing legal challenges, which could stall the relief for many millennials who were counting on it to reduce their debt load and accelerate savings for a home.

Stephanie Valentini, a 32-year-old graduate student and behavioral analyst in Kansas, said that she and her partner will have to pay at least $1,000 per month when student loan payments resume. She added that rent, medical bills, and other costs have forced them to delay life milestones.

"Even as two well-educated and privileged women, it's unlikely we'll be able to afford a house and children," she said.

Home ownership has long been a key way to build wealth. And the struggles for first-time buyers have landed especially hard on people of color, who historically have been subjected to redlining and wage gaps. The millennial generation in the US is more diverse than their predecessors, and Gen Z is outpacing them as well.

According to the National Association of Realtors, 88% of people who bought a primary residence between July 2021 and June 2022 were White. Among first-time buyers during that period, 82% were White, the highest share in at least 20 years.

It's tough for single people to buy a home, and millennials are increasingly in that cohort. They're getting married later in life than previous generations, and more than half of the age group are unmarried.

Caitlyn Coyle, a 33-year-old store manager in New Jersey, said that she feels like she will never be able to buy a home unless she is applying for a mortgage with a significant other. She explained that although she makes decent money and is not struggling, she is only able to save a small amount from her paycheck to put towards a down payment.

Catherine Young, a 32-year-old producer in Los Angeles, is still hopeful she can buy a house. However, she isn't counting on a dual income to make it happen.

"I can't guarantee that I'll find someone I want to be with long-term before I'm ready to buy a home," she said. "But I really want the home more."