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

  • What's Driving the Market

    Podcast Highlight - Considering the Benefits of Rising Rates

    March 8, 2023
    The team explains how Money Market funds are doing in the current financial climate or whether you should consider the “sweet spot” right now in Treasuries. It’s the time to be asking “Liquid Money Markets or Locking It Up.” They also share their experience on timing.
    Read this Article
  • Hubbard Baro Memorial Golf Tournament

    Honored to Support Our Central Valley Veterans

    November 22, 2021
    This “In Their Honor” golf tournament began in 2005 in commemoration of Corporal Jeremiah Baro and Lance Corporal Jared Hubbard who were killed in action in 2004, and then Nathan Hubbard who was killed in action in 2007. As our troops return home, many struggle with injuries and health conditions that make the challenges of life even more demanding. Our contribution to the local Veteran’s Affairs Medical Center helps them do their part to get these men and women the treatment and care they deserve, with hopes they too can live the American Dream.
    Read this Article
  • Rules for Charitable Giving are Always Changing

    Rules for Charitable Giving are Always Changing

    October 27, 2021
    There are many tax tactics to keep in mind for preparing next year’s return. Starting well in advance of the tax filing deadline is simply a prudent thing to do. But rules for charitable giving are confusing and you must be careful before entering that deduction. Here’s some things to think about regarding Charitable Giving: recent changes made by IRS, sorting through the maze of IRS rules and knowing who you can make donations to.
    Read this Article
  • What's Driving the Market

    Podcast Highlight - New Defined Contribution Plan Limits

    March 12, 2023
    The team shares insights about how the new Defined Contribution limits for plans like 401k, IRAs, and Roth IRA could affect you. Also included is an update on exciting news for small business owners and their employees regarding Roth IRAs.
    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