Where Have All the Young Home Buyers Gone?

Previous postings (June 17, 2019, et. al.) noted that the amount of outstanding student loan debt has become so large that it is posing a thorny problem for American society.  It appears that this phenomenon is playing out in the U.S. housing market. According to the National Association of Realtors, the median age of first-time homebuyers has increased to 33. This is the oldest median age ever recorded for this group with the data going back to 1981. For all homebuyers, the median age also hit a record reaching 47 years of age. When one considers that the median age for all homebuyers was only 31 in 1981 this “graying” of the home buying public is very noteworthy.

Can all of this be explained by the student loan indebtedness of younger potential homebuyers? While potential young purchasers are surely hindered by student loan payments that make accumulating a down payment difficult, other factors are at work. Housing affordability has become a problem, especially on the coasts and in interior housing hotspots like Denver, Austin and Minneapolis. The tighter regulations and “lender hangover” stemming from the Great Recession of 2008-09 has made it more difficult to obtain a mortgage loan for any borrower with less than stellar credit scores. Builders have cited a shortage of affordable lots and construction labor as they erect fewer and fewer new homes within reach of the first-time buyer. New homes as a proportion of all purchases clocked in at 13%, also a low since record-keeping began in 1981.

So, where will these trends take us? Baby boomers have seen the value of their houses climb for most of their adult lives. However, the 2008-2012 downturn in housing was so severe that it invalidated the myth that “housing prices only go up.” As the baby boomers continue to age and many pass on to the hereafter, their need for housing stock will be reduced. Perhaps this will cause a better balance between housing supply and demand, increasing affordability for younger people. However, we will only know for sure when the future arrives!