Going back to since the National Association of Realtors first tracked the information, the share of homes bought by first-time homebuyers has never been smaller than in 2024.

High home prices coupled with high interest rates have pushed monthly mortgage payments beyond what many young people can afford, said one Realtor.

“Interest rates are higher right now, which we hope to come down, but prices are the same or higher as well, and that probably becomes an affordability problem for first-time homebuyers,” said Darin Zuber of the Zuber Real Estate Team in Fresno. “They want to live in certain areas, and they just can’t afford it.”

But spending habits of would-be homebuyers also play no small role in affording a home.

What Zuber has seen is the effect of high car prices on loan qualifications. He said many young people have been lured by the prestige of a new car, lowering their available income for a home.

Stubbornly High Interest Rates Keep Young People Out of Market

The National Realtor report shows that of the homes purchased this year, only 24% went to first-time homebuyers. That’s the lowest rate since the association began tracking the data in 1981. In 2023, 32% of homes were bought by first-time buyers. Throughout the 2010s, the rate never dropped below 30% and half of all home purchases came from first-time buyers in 2010.

The now-7% interest rate has created sticker shock for young people, said John Vartanian, owner of M.A.V. Mortgage.

“Either they’re coming from not paying anything to having a $3,000 a month mortgage for a modest home here in Fresno,” Vartanian said. “Or they might be paying rent, but it’s going to be significantly cheaper from a monthly payment perspective.”

The homebuying industry had anticipated home loan rates to drop, but even the Federal Reserve’s quarter-point November rate drop didn’t affect the cost for a mortgage. Rates reached a two-year low in September ahead of the half-point cut that month, but that didn’t last long.

Strong investor outlook following President-elect Donald Trump’s victory sent bond yields higher, including the 10-year Treasury, Vartanian said. That sent mortgage rates back to near 7%.

While the trend has been toward lower interest rates, it will take some movement to get young people back into the market, Zuber said.

A drop to 5.25% from 7% on a $400,000 loan means an annual $8,000 savings. That computes to $700 a month lower.

“That’s a huge difference for younger people,” Zuber said.

First-Time Buyers Older Than They’ve Ever Been

Another point-of-interest? The rate of all-cash buyers has never been higher, according to the association. More than quarter — 26% — of buyers paid cash for homes. This pits cash buyers against those buying for the first time, said Jessica Lautz, deputy chief economist and vice president of research.

“The U.S. housing market is split into two groups: first-time homebuyers struggling to enter the market and current homeowners buying with cash,” Lautz said in a release.

The median age of first-time buyers reached the oldest it’s ever been. At 38 years, the median age is seven years older than it was 10 years ago. With that, came an increase of median household income — $97,000 compared to $95,900.

Zuber sees it an as example people needing more monthly cash for payments.

Saying No to Fixer-Uppers

Households are also becoming multi-generational. Adding a parent or relative helps keep costs down, the association said.

More young people are staying longer in their parents’ homes, the report stated.

Buyers also don’t want fixer-uppers as much, Zuber said.

“Two younger first-time homebuyers, you’re only making $50,000 each, that’s just not that much money,” Zuber said. “And they may be used to living in areas that they don’t want to go down to what they consider fixer-uppers and homes that are 60, 70 years old. They’ll go find rent or something else out north.”

Car Purchases a Major Obstacle for Some Homebuyers

Zuber also said he’s seen younger people opting for nicer cars, something that greatly impacts the ability to buy a home.

“It’s easy to go buy a nice car and feel good about yourself, but nothing kills (loan-to-value ratio) like credit card payments, school loans, or a car,” Zuber said. “And a car is what we see people doing.”

In February, Investopedia reported the average monthly payment of a car reached $623. Nearly 18% of auto loans required monthly payments more than $1,000.

Related Story: $1,000 Monthly Car Payments Push Fresnans and Others Into Bankruptcy

But banks take that monthly payment much more seriously than one might think.

“A $700 care payment means someone would qualify for approximately $100,000 less than someone who didn’t have a car payment at all when it is factored into the debt-to-income ratio,” Vartanian said.

And with cars being so easy to qualify for, many getting out of college will trade in a beat-up old car for a new one, compounding the difficulties in qualifying, Zuber said.

The solution is simple, though, Zuber said. He said buy the home first, and then buy the car.

“You can literally buy any car you want, but if you buy the car first, your buying power will be decreased significantly,” Zuber said.