Article

Can the Next Generation Afford Home Ownership?

A happy, young couple just got the keys to their first home.

This article explores factors influencing housing affordability, the impact of current economic conditions, and future prospects. Readers will discover insights into decision-making for first-time real estate purchases and strategic approaches to homeownership.

July 22, 2025
A happy, young couple just got the keys to their first home.
Important Disclosure: Content on our website and in our newsletters is for informational purposes only. The information provided may (or may not) directly apply to your situation. We recommend that readers work directly with a professional advisor when making decisions in the context of their specific situation.

It used to be a rite of passage to buy a starter home by your late 20s. Today, many young adults wonder whether that milestone is slipping out of reach. Rising prices, higher borrowing costs, and a limited supply of entry‑level properties have created the most challenging landscape for first‑time buyers in decades. But with the right strategy, the dream of owning a home can still move from uncertainty to peace of mind.

The Roadblocks Facing Young Buyers

Sticker shock is only part of the story. After a pandemic‑era boom, median home prices are roughly 40 % higher than five years ago, while wages have grown less than half that pace. At the same time, 30‑year mortgage rates that once hovered near 3% have doubled, slashing the amount a buyer can finance on the same monthly payment.

Student debt and lifestyle inflation complicate saving. A 20% down payment on a $450,000 starter home is $90,000—tough to accumulate while carrying student loans and paying record‑high rents. It’s no surprise that nearly 60% of millennials who hope to buy in the next five years expect to receive family help.

Supply is historically tight. Baby boomers are aging in place, and institutional buyers continue to purchase single‑family rentals. With fewer existing homes hitting the market and new‑construction costs elevated, competition pushes prices even higher.

These hurdles are real, but they’re not immovable. Big goals are achieved by breaking them into a series of smaller, controllable steps.

Creative Paths to the Front Door

  • Think beyond the classic 20 % down. Federal Housing Administration (FHA) loans require as little as 3.5 % down, while many state housing agencies offer zero‑interest silent seconds to first‑time buyers. Just remember that a lower down payment means a higher monthly obligation, so run the numbers with a fiduciary.
  • House hacking turns a liability into an asset. Buying a duplex and renting the other unit—or even taking on a roommate—can offset the mortgage and help you qualify for a larger loan.
  • Shared‑equity arrangements trade future appreciation for help today. Several fintech firms will contribute part of your down payment in exchange for a slice of the home’s price appreciation at sale. This option can bridge the gap for savers who are close, but not quite there.
  • Tap retirement savings cautiously. First‑time buyers can withdraw up to $10,000 of IRA funds penalty‑free, and some employer plans allow loans against 401(k)s. These moves carry opportunity cost, so coordinate them within a broader financial‑planning framework and consult your financial advisor first.

With each of these strategies, the buyer must weigh taxes, cash‑flow risk, and long‑term goals.

Action Plan: Turning Dreams into Deeds

  • Know your credit profile. Aim for a FICO score of 740+ to unlock the best rates, but don’t be discouraged if you’re lower—an advisor can map out incremental improvements.
  • Set a realistic price range. Housing payments (principal, interest, taxes, insurance, HOA) should generally stay below 30 % of gross income after factoring in other debts.
  • Automate a future mortgage savings plan. Treat an online, high‑yield savings account like a monthly bill; even $300 a month grows to nearly $19,000 in five years at 4% interest.
  • Stress‑test the budget. Model scenarios for rate increases, job changes, or unexpected repairs so you enter the market with eyes wide open.
  • Leverage professional guidance early. A financial advisor can coordinate lender pre‑approval, down‑payment assistance, and tax strategies while ensuring homeownership fits within your broader retirement and investment plan.
  • Set aside an emergency fund. This will help to care for unexpected expenses quickly.

Key Takeaways

Homeownership is tougher for first-time buyers today, but it’s not impossible. Success hinges on diligent planning. Consider all financing options, including FHA loans and shared equity; one just might be right for you. Be sure to protect long-term wealth by fitting a purchase into an overall financial journey. Partnering with a financial professional can help translate today’s dream into tomorrow’s equity.

Other content you may like

  • Black and blue cover slide for a presentation

    July Student of the Market

    July 29, 2025
    This has been the best May and June for U.S. Stocks since 1950! Even so, international stocks are still leading this year. How does geopolitical turmoil impact the market? Take a look at that answer, as well as cash performance, bonds and the 60/40 portfolio performance.
    Read this Article
  • Strong Valley Wealth & Pension Mid-Quarter Round Table Highlights

    Podcast Highlight - What can we do to be prepared?

    June 23, 2023
    With the news focused on the impending recession, is there something that can be done to prepare without responding in panic and making poor decisions. The team gives examples of why a financial plan is so important.
    Read this Article
  • The ABCs of Estate Planning

    September 3, 2025
    Do you need an estate plan? It’s not always a popular topic, but it’s an important consideration for everyone, regardless of income or age. Learn the basics of what’s covered in estate planning and how a professional can guide you through your unique circumstances.
    Read this Article
  • Financial Assets & Accounts

    How To Keep All Your Financial Accounts & Assets Neatly Organized

    January 22, 2021
    Don’t let disorganization become one of your biggest money problems.
    Read this Article
  • The link you have selected is located on another server. The linked site contains information that has been created, published, maintained, or otherwise posted by institutions or organizations independent of this organization. We do not endorse, approve, certify, or control any linked websites, their sponsors, or any of their policies, activities, products, or services. We do not assume responsibility for the accuracy, completeness, or timeliness of the information contained therein. Visitors to any linked websites should not use or rely on the information contained therein until they have consulted with an independent financial professional. Please click “Continue to Link” to leave this website and proceed to the selected site.
    phone-handset