Damian Eales Chief Executive Officer | realtors.com
The housing market in the United States is facing a significant supply crunch, particularly affecting first-time buyers. Freddie Mac's latest market outlook report highlights that there are approximately 30 renter households for every available home for sale, a stark increase from less than 10 in 2006.
This shortage dates back to the Great Recession, which severely impacted new home construction. Despite a gradual increase in construction since then, demand has outpaced supply, resulting in a deficit of at least 1.5 million homes. Freddie Mac economists note that first-time buyers must contend with both high prices and increased competition due to the lagging supply.
Affordability remains a major challenge. The report indicates that between January 2000 and July 2024, entry-level home prices grew 63% more than high-end prices, exacerbating difficulties for those without substantial wealth.
Mortgage rates have also risen, further complicating the situation for first-time buyers. After a brief dip in September, the average rate for a 30-year fixed mortgage increased over four consecutive weeks to reach 6.54%.
A LendingTree survey found that over half of renters fear home ownership is unattainable. Among those who prefer to own, cost is the primary barrier: 65% cite down payment costs as an obstacle, while others point to high local home prices and credit score challenges.
Despite these barriers, owning a home remains an aspiration for many Americans. The survey shows that 83% would prefer owning over renting across various demographics. Personal freedom and stability were key reasons cited by respondents rather than financial gains like property appreciation or wealth building.
However, potential buyers should be aware of the costs associated with homeownership compared to renting. Tools such as Realtor.com®'s rent or buy calculator can assist individuals in making informed decisions about whether renting or buying makes more financial sense.
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