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Millennials find it more difficult than ever to buy a first-time home.
They’re about right.
In 1975, the price of a typical home was about 2.4 times the annual income of a median household under 40, the standard measure of housing affordability, according to a new report from the Pew Research Center.
By 2019, its price-to-income ratio had risen to 2.9. In 2024, it will reach 3.5.
Over the past decade, home prices have risen far faster than wages. Increasing price-to-income ratios and rising interest rates are putting homeownership out of reach for millions of Millennial and Gen Z Americans.
“It’s becoming much harder for young families to afford housing,” said Richard Fry, a senior research fellow at Pew.
Pew’s report reveals why homeownership is becoming increasingly the preserve of older Americans, and why first-time buyers seem like a dying breed.
First-time homebuyers are a disappearing breed
According to the National Association of Realtors, by 2025, first-time homebuyers will only account for 21% of all homebuyers, the lowest on record. The typical age of first-time buyers has risen to 40, an all-time high.
Nine in 10 adults under 40 say buying a first-time home is harder for them today than it was for their parents, according to a new Pew research report. All adults under the age of 40 are Millennials, born between 1981 and 1996, or Gen Z, born after 1997.
Young adults are also less likely to think that a home is a “very good investment,” with 24% of Americans under 40 holding that view, compared with 38% of Americans 60 and older, the Pew study found.
Millennial Colin Poan is the youngest of four children. All of his Gen X siblings own homes. He isn’t.
“A little late to the party,” he said.
Poan lives in Irvine, California, where the average home costs about $1.5 million. Even with a six-figure income, it’s doubtful you’ll be able to come up with a down payment or cover your monthly mortgage payments.
“I’m starting to think that home ownership may not be an option for me unless some unknown inheritance occurs,” he said.
Home prices across the country have soared since 2012, when the country recovered from the Great Recession. Pew reports that from 2019 to 2024, the median home price rose from $269,600 to $350,000, an increase of 30%.
Over the same five-year period, median income increased by only 9%, from $92,700 to $100,900.
The housing price-income ratio reached 3.5 in 2024. The last time this ratio was this high was in the mid-2000s, at the peak of the millennial housing bubble, Pew reports.
High prices and mortgage rates are making housing unaffordable
High mortgage rates and soaring prices have combined to push housing out of reach for renters.
Pew provides the following example.
In 2019, a homebuyer could have purchased a $269,600 home for $1,689 per month with a 3.5% down payment and a 3.9% mortgage.
Five years later, in 2024, the same buyer would face a purchase price of $350,000, a mortgage rate of 6.7%, and monthly costs of $2,776. The difference is more than $1,000.
“That can upset the balance of, ‘Should I buy or should I continue to rent?'” Fry said.
From 2019 to 2024, home prices rose faster than young people’s incomes in 142 of the 160 metro areas surveyed by Pew.
“What’s really striking is that affordability barriers are no longer limited to New York, San Francisco and Boston,” said Nadia Evangelou, chief economist at the National Association of Realtors, which conducts similar research.
How expensive will living in major American cities be in 2026?
According to Pew, the median home prices and price-to-income ratios in several metropolitan areas are:
- Atlanta: Median home price is $390,000 and price-to-income ratio is 3.8.
- Boston: Median home price is $630,000. The price-to-income ratio is 4.3.
- Chicago: Median home price is $300,000. The price-to-income ratio is 2.8.
- Cleveland: Median home price is $230,000. The price-to-income ratio is 2.5.
- Dallas: Median home price is $375,000. The price-to-income ratio is 3.7.
- Denver: Median home price is $600,000. The price-to-income ratio is 4.6.
- Detroit: Median home price is $260,000. The price-to-income ratio is 2.9.
- Houston: Median home price is $320,000. The price-to-income ratio is 3.7.
- Los Angeles: Median home price is $850,000. The price-to-income ratio is 7.5.
- Miami: Median home price is $460,000. The price-to-income ratio is 5.
- New York: Median home price is $600,000. The price-to-income ratio is 4.6.
- Philadelphia: Median home price is $350,000. The price-to-income ratio is 3.3.
- Pittsburgh: Median home price is $250,000. The price-to-income ratio is 2.5.
- San Francisco: Median home price is $1 million. The price-to-income ratio is 5.8.
- Seattle: Median home price is $700,000. The price-to-income ratio is 5.
- Washington, DC: Median home price is $550,000. The price-to-income ratio is 3.9.
However, there is still a lack of affordable housing nationwide.
“This isn’t happening the same way everywhere,” Evangelou said.
Here are 10 metro areas where affordable housing is still available
Pew identified 10 relatively affordable metropolitan areas with price-to-income ratios of 2.7 or lower. Utica – Rome, New York. Canton Massillon, Ohio. Cleveland; Pittsburgh; Youngstown Warren, Ohio. Syracuse and Rochester, New York; St. Louis. and Scranton-Wilkes-Barre, Pennsylvania.
More and more young people are being excluded from the housing market and are choosing to live with roommates or their parents.
According to a study by the Urban Research Institute based on census data, the proportion of adults aged 25 to 34 who are homeowners (head of household or their spouse) has decreased from 40% in 2005 to 29% in 2024.
Meanwhile, the proportion of adults aged 25 to 34 who live with their parents rose from 12% in 2005 to 20% in 2024.
“They prefer to be in Mom and Dad’s basement,” says Jun Zhu, a clinical associate professor of finance at Indiana University and a non-resident fellow at the Urban Institute.
Will relief come to home buyers?
Housing experts say the first-time homebuyer market is unlikely to change dramatically over the next few years. However, the market is already seeing gradual improvements.
Redfin reports that home prices rose just 2% in the year to May. Over the past few years, prices have remained relatively flat, especially after adjusting for inflation.
“Real values are declining very, very gradually,” said Darryl Fairweather, Redfin’s chief economist.
However, the costs of homeownership, such as insurance and property taxes, continue to rise, creating affordability challenges for all homeowners.
“Over the next 10 years, it’s probably going to get easier to get into the housing market, but it’s going to be harder to stay in the housing market,” Fairweather said.
