For 26-year-old Isa Gil, becoming a homeowner wasn’t part of the plan.
After seven years of saving through her 401(k), an unexpected opportunity allowed her to buy her first home this spring. Even then, she says she never imagined buying a home at her age.
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“Insane. Insane, especially at my age,” Gil said. “I don’t feel like many people are here yet, which is sad.”
Her experience is becoming increasingly uncommon.
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A Realtor.com analysis found the median age of a first-time homebuyer has climbed to 40, up from 30 in 1990, as rising home prices, larger down payments and higher costs of living make homeownership more difficult for younger Americans.
The report found affordability is no longer just about home prices. It’s about how those prices compare with incomes, how long it takes to save for a down payment and how much longer buyers must wait before they can begin building equity.
Home prices have outpaced incomes
According to Realtor.com, the median U.S. home price has increased from $96,800 in 1990 to $418,000 today, a 332% increase.
During that same period, median household income grew from $31,000 to $85,000, an increase of about 174%.
As a result, the typical home now costs nearly five times a household’s annual income, compared with just over three times annual income in 1990. The price-to-income ratio has increased from 3.1 to 4.9.
Gil said she always expected to buy a home later in life.
“I fully expected to buy a house much later in life when I had settled down a bit,” she said. “Definitely not at 26.”
First-time buyers stretching to qualify
Jason Kindler, president of First Coast Mortgage Funding, said many first-time buyers are finding ways to get into the market with smaller down payments because saving larger amounts has become increasingly difficult.
“What we’re seeing is a huge gap between either someone that’s putting down the 20% and that first-time home buyer,” Kindler said. “First-time homebuyers are either using down payment assistance or they’re putting less than 10% down.”
He said buyers today are taking on significantly more debt than previous generations.
“Our first-time homebuyers are right at about a 49% average debt-to-income ratio,” Kindler said. “Back in 1990, that average was about 30% or 31%. That’s way up.”
Gil purchased her home for $285,000 and put 10% down. Even so, she said she had to bring about $32,000 to the closing table after accounting for taxes and closing costs.
“Closing costs and taxes are so expensive, and I only put 10% down,” she said.
Nationally, Realtor.com found the typical first-time buyer now puts down about $41,800, which is more than five times the typical $8,200 down payment in 1990.
The report also found it now takes an estimated 9.7 years to save for a typical down payment at today’s savings rate. In 1990, it took about 3.2 years.
Young buyers feel priced out
Gil said younger generations are often criticized for not saving enough, but she believes the financial realities they face today are fundamentally different.
“I don’t want to say we work harder, but I think we have to work really hard to make less than what people were making then,” she said. “Everything is more expensive now than it was then.”
When shown that home prices have increased by more than 300% since 1990, Gil said the numbers reflect what many young buyers already feel.
“That’s insane when you look at it that way,” she said. “It’s completely unrealistic for people my age to be able to buy a house at all or even save to buy a house because of the cost of living right now.”
Gil considers herself fortunate to have become a homeowner at 26 but said she doesn’t think it would have been possible without years of saving and the opportunity to use those funds for a down payment.
“I don’t think I would have ever been able to buy this house,” she said. “I was in a super fortunate circumstance.”