New data from the Federal Reserve Bank of New York shows a surprising phenomenon: The average age of first-time homebuyers getting a mortgage has barely budged over the past two decades, remaining in the mid-30s. At first glance, that doesn’t seem to make sense. You’d think that given the steep rise in home prices versus incomes, it’s primarily the young who delay purchases as they get stuck in rentals waiting for paychecks, and banking savings. The evidence says not so. Expanding on the New York Fed’s findings, a new study from the American Enterprise Institute’s Housing Center concludes that the same problem is haunting would-be buyers at all age levels. “When purchasing power declines, fewer people buy homes at 28—but also fewer purchase at 38 or 48,” writes the author, the Housing Center’s co-director Ed Pinto. “The result is a broad-based drop in home ownership.”
The AEI also points to a disturbing trend that amounts to the de-democratization of American housing. “The less-rich are getting squeezed out, and that trend is uniform across all age groups,” Pinto told Fortune.
The overriding problem is well known. It’s the notorious affordability issue, and as Pinto points out, the crux isn’t excessively high mortgage rates: That monthly nut is now about average compared to the historic norm. It’s the huge divergence between median home prices and household incomes that’s stymied would-be buyers; what families are paying for the cape or colonial as a multiple of their paychecks has jumped from 4.3 in 2003 and 5.1 in 2017 to nearly 6.0 today. The surprise is that all age groups are getting pounded about equally. Mining data from the Census Bureau and its American Community Survey, the AEI shows that from 2000 to 2022, the home ownership rate in every age cohort dropped in the 8% to 10% range. For 35-year olds, it went from 60% to 50%, for those aged 40 from 70% to 59%, and for the 50 contingent from 78% to 69%. As for 30 to 39 year olds, the big first-time group, the figures more or less mirrored those across the entire spectrum, falling from 60% on average to under 50%.
The AEI also calculates the share of house-key holders by income, specifically for that “first-timers” group. As of 2022, only one-quarter of families earning $50,000 to $75,000 owned homes, rising to just 30% in the $75,000 to $100,000 tier. By comparison, 70% to 80% of households making $175,000 and up have captured the longstanding American Dream. Pinto reckons that in each age category about evenly, the more affluent households are claiming a bigger and bigger share of the ownership pie. “As the pool of first-time buyers gets smaller across the board, the marginal families get excluded across the board,” he says. Hence, though overall home ownership has fallen, it’s those income-stressed households, not the well-to-do, that have suffered most of the drop.
Pinto explores the scenarios that could restore lost affordability
Pinto notes that the market has already entered a gradual correction phase following the blowout that peaked in early 2022. The AEI tagged home price appreciation (HPA) at just 1% year-over-year in March, and projects slight declines for 2026, 2027 and 2028. “We’re seeing slow progress” he says. “As long as prices are flat and incomes are rising 3% a year, affordability is improving.” But he adds that the gap is still so large that if nothing else changes, the lower and middle-income families stuck on the sidelines could get locked out for years to come. Today, America suffers from a severe supply shortage. The main culprit: A dearth of lots allowed for starter homes permitted under state and city zoning laws and regimes. To relieve those bottlenecks, Pinto advocates state and municipal programs that moderately reduce lot sizes. That would allow builders to erect far more small starter homes. The reduction in land costs and the reduced square footages combined, he says, would lower prices by 15% to 20%.
No, contrary to legend, it’s not mostly the young who are getting excluded from landing a yard and three bedrooms. It’s families at all ages. It’s time for America to adopt supply-boosting policies to help all potential buyers get into a home.
