Young Americans are skipping rent altogether by living with their parents until they can save up for a down payment.
Even with low mortgage rates and a strong economy, many first-time homebuyers are opting to live a “basement-to-own” existence due to lack of affordability, National Association of Realtors Chief Economist Lawrence Yun said during the trade organization’s annual conference, the Realtors Conference & Expo, on Friday afternoon.
An average home in the United States currently commands $279,500 and requires an income of at least $49,584 to save up for a down payment.
Lawrence Yun
Despite modest increases in affordability between the second and third quarters, more than 30 percent of first-time homebuyers relied on help from family or friends for their down payment., Yun said.
Another strategy some have embraced is cutting out rent altogether by living with parents, often in basements or detached portions of a home.
While this can help some young people make the leap to homeownership, Yun also said it can wedge a gap between those who come from “American families that don’t have deep pockets.”
Like in 2018, 33 percent of all homebuyers are first-time buyers. That number is lower than the historical 40 percent. The median age of a homebuyer is 47, rising for the third year in a row.
Yun also said home prices are expected to grow at 4 percent next year while mortgage rates will remain just below 4 percent. The biggest hurdle to affordability, he said, is lack of inventory. Not enough available, affordable homes are built to meet demand. As a result, prices and competition for homes are growing at a rate that even low mortgage rates and a strong economy cannot offset.
“Low inventory conditions hurt would-be first-time buyers most,” said Yun. “Their homeownership dream and the opportunity to build wealth gets delayed until more inventory choices reach the market.”