The American dream of homeownership is facing one of its most severe tests in modern history. A perfect storm of economic factors has created a housing market where younger generations are increasingly sidelined, competing against older, wealthier buyers and deep-pocketed investors.
Data reveals a market that has fundamentally changed over the past few decades, making it nearly unrecognizable to previous generations. For many, the path to owning a home is no longer a given.
The New Reality: This Isn’t Your Parents’ Housing Market
Recent analysis highlights four key shifts that illustrate the depth of the current affordability crisis.
Homebuyers Are Older Than Ever
The median age of a U.S. homebuyer has hit a record high of 56, a dramatic increase from just 31 in 1981, according to the National Association of Realtors (NAR). Today, Baby Boomers represent the largest share of homebuyers, often paying with cash and creating fierce competition for younger buyers who rely on financing.
First-Time Buyers Sidelined
The share of first-time buyers in the market has plummeted to an all-time low of 24%. Before 2008, they typically made up around 40% of all purchases. This stark decline underscores the massive barrier to entry that now exists, preventing many from building wealth through real estate.
The Income Gap Widens
Wages have failed to keep pace with soaring home prices. In 1984, a new home cost 3.6 times the median household income. By 2023, that figure had jumped to 5.3 times. A recent Bankrate study found that a household now needs an annual income of nearly $117,000 to afford a typical home—a 50% increase since just 2020.
Case Study: Massachusetts Reveals a Market Under Extreme Stress
While affordability is a national issue, some states are experiencing an extreme version of the crisis. A new report from Realtor.com® shows that while housing inventory is rising in most of the country, it’s shrinking in Massachusetts.
The state has seen its inventory of homes priced below $500,000 cut in half since 2019. Meanwhile, listings for homes over $1 million have doubled.
“In my two decades in the Massachusetts mortgage business, I have never seen a more challenging time for millennials to purchase a home,” says local mortgage professional Bob Driscoll. He notes the challenge isn’t just saving for a down payment, but for the “potential bidding war that often drives prices beyond the asking price.”
The Rise of the Investor Class
Adding to the pressure, homebuyers are no longer just competing with each other. They are increasingly up against investors.
In 2024, investors purchased 13% of all homes sold, up from just 2% in 2001. A majority of these investors pay in all-cash, a major advantage that budget-conscious buyers often cannot overcome, locking them out of the most affordable properties.