"I’ll never own a home."
That’s what one in five millennials and one in 10 Gen Zers think, according to a new Redfin survey that polled 3,313 young adults in May and June. They point to their inability to save for a down payment, costly financing, and student loan debt as major obstacles.
The findings underscore just how much housing conditions have deteriorated for those generations entering their prime household-forming and homebuying years and how far the American Dream is out of reach — without major sacrifice or a helping hand.
"I think the big concern is that homeownership is becoming increasingly unaffordable," Redfin chief economist Daryl Fairweather, told Yahoo Finance. "Overall the picture looks like it’s going to get harder and harder for people to break into the housing market and buy their first home."
Barriers to affordability
Inflation, rising debt, and higher costs of borrowing are making it harder for entry-level buyers to afford a home.
Nearly half of millennials and a third of Gen Zers cited the inability to save for a down payment as an obstacle, while 21% of Gen Zers and 16% of millennials said they need to pay off student loan debt before they’re able to purchase a home.
More than one-third of respondents said mortgage rates were too high and another third noted they wouldn’t be able to afford monthly mortgage payments.
The average payment took up 36.5% of the median household income in July, a record high and up from 24.3% in 2021, according to Black Knight, a mortgage technology and data provider. Home affordability in July was at its worst level since 1984, the firm found, and that’s before mortgage rates topped 7%.
With rates at 7.23% on Aug. 24, a hypothetical buyer purchasing a median-priced home using a 20% down payment would face a $2,423 monthly mortgage payment — a 91% increase over the past two years, Black Knight cited.
"Mortgage payments are a hurdle. There really aren't that many homes for sale to begin with," Fairweather said. "So people's options are limited."
The shortage of existing homes on the market have also kept home prices elevated this year. Many homeowners are reluctant to sell their homes and lose their current low mortgage rate.
The median home sale price is also at record highs, according to Redfin analysts, up 40% since 2019. Though wages have risen 20% over the same timeframe, they have failed to keep up with rising costs of life – hurting first-time buyers’ chances of entering the market.
"Even if they do find a home that they want, a lot of the time it's out of their budget," Fairweather said. "So that just creates a big barrier, the lack of inventory and the high rates I think are the biggest barriers right now."