Affordability Woes Deepen for U.S. First-Time Homebuyers
Affordability challenges for first-time homebuyers in the U.S. are set to worsen, according to a recent Reuters poll of property analysts conducted from 12-27 November. Despite slowing price increases, tight housing supply and limited Federal Reserve interest rate cuts will continue to push prospective buyers out of the market.
The lack of affordable entry-level housing remains a key obstacle, with prices still over 50% higher than pre-pandemic levels. While interest rates may dip slightly over the next six months, they are unlikely to bring significant relief. Ten out of nineteen respondents in the survey now expect purchasing affordability to decline further, reversing earlier optimism from an August poll.
Wealth disparity between generations is a growing concern. John LaForge of Wells Fargo noted that older generations, many of whom own multiple homes, are pricing out younger buyers with limited savings for down payments. The median age of U.S. homebuyers has risen to 49, a sharp increase from 31 in 1981, highlighting the widening gap.
The Reuters poll also forecasts average home price increases slowing from 5.1% this year to 3.2% in 2025, with growth still outpacing inflation. Despite this, rent inflation may stabilise or decrease, according to over 70% of respondents. Yet, two-thirds believe home prices will rise faster than rents over the coming year, adding to affordability pressures.
While platforms like Reddit and shows such as American Dream TV spotlight the struggle for homeownership, many first-time buyers face little relief. Analysts predict affordability will remain elusive without substantial changes in supply and financial accessibility.