First-time home buyers are now older than ever as the housing crisis deepens

America’s first-time homebuyers are reaching an unprecedented milestone, and they won’t be celebrating it.

According to the latest data from the National Association of Realtors (NAR), the median age for first-time buyers has risen to 38 – the oldest on record and up three years from just last summer.

Gone are the days when 20-somethings caught their first slice of the American dream.

In the 1980s, first-time buyers were typically in their late 20s.

Now, the dream of home ownership feels more like an uphill battle, thanks to a perfect storm of rising prices, dwindling housing supply and stiff competition from buyers with deeper pockets.

“The first-time buyer who can enter today’s market is older, higher-income [and] it’s richer,” Jessica Lautz, deputy chief economist at NAR, told CNBC. Simply put, today’s buyers need more financial muscle to cover those fancy down payments.

This year, just 24% of home purchases were made by first-time buyers—the lowest percentage since NAR began tracking in 1981. With a staggering housing shortage estimated at 4 million homes and relentless price inflation , it is easy to understand why the younger generations are feeling isolated.

“The biggest housing issue today” is that shortage, noted Orphe Divounguy, senior economist at Zillow.

Some construction gains were made recently, with single-family home projects seeing a 2.7% increase in September, but the housing market remains under severe pressure.

The price of a typical starter home rose to $250,000 in August, from $240,000 a year earlier, according to Redfin. Home ownership has largely become a game for repeat buyers who can leverage their existing home equity, often bypassing the hassles of mortgages altogether.

About 26% of buyers this year paid cash for their homes — an all-time high, NAR says. This trend has left young adults watching from the sidelines, while baby boomers and retirees solidify their status as major market players.

“When we look at the average home buyer, for older buyers, they have about $300,000 in home equity versus younger millennial buyers,” Selma Hepp, chief economist at CoreLogic, told CNBC.

Meanwhile, renters are finding themselves stuck as rent costs continue to outpace wage growth. At the peak of 2022, rents rose 16% annually, while wages peaked at just 9.3%, according to Indeed.

The squeeze means that over half of renting households are spending more than 30% of their income just to keep a roof over their heads.

“We’re seeing renters staying renters longer because affordability has been squeezed so much,” Divounguy said.

High monthly rent payments and existing debt, such as student loans, are eating away at any chance of future home ownership. This contributes to high debt-to-income ratios, a barrier to securing a mortgage.

As Lautz said, “All these things add up, especially in an inflationary environment.”

If this trend does not change, the American dream of home ownership may become a relic of the past for younger generations.

During a CNBC “Your Money” event, Jonathan Scott of HGTV’s “Property Brothers” issued a grim warning: “Give it another 20 years and literally no young people will be able to afford to buy of a house, period.”