The concept of buying a home has become more aspirational for the youth generation in America.
A few months ago, Chris Swanson was actively searching to buy a house. However, now he’s exhausted. At 39 years old, Chris has expressed significant frustration with the housing market as a first-time homebuyer. Although he holds a good job and managed to pay off his educational loans before taking out a mortgage, the process of buying a house has proven to be overwhelmingly challenging. Feeling that two days’ time has been wasted, he’s struggled with high interest rates to fulfill his homeownership dream. The cost of homeownership has escalated to the point where purchasing a house seems nearly impossible.
Being a homeowner is the primary vehicle for wealth accumulation for most Americans. However, a significant portion of the population is excluded from homeownership. The situation is direst for millennials (ages 27-42), who are buying homes at a much slower pace than previous generations.
According to research by the National Association of Realtors in the US, Baby Boomers (ages 57-75) are making the most home purchases this year. This generation had been millennials in 2014. Jessica Lautz, Deputy Chief Economist of the Association, mentioned that Baby Boomers are leading in actual home buying due to their ability to buy with cash, having cleared off mortgages. They don’t necessarily need to take loans and aren’t concerned about interest rates. Unfortunately, millennials have been priced out of this market.
Joseph Gyourko, a real estate professor at the Wharton School of the University of Pennsylvania, has stated that high interest rates are a real concern for young people. They not only struggle with higher mortgage payments but also don’t get higher wages, and saving isn’t any easier for them. In the midst of this, you have to make a decision whether to buy a house or not, which is quite challenging.
The real estate sector is experiencing robust growth, with a rising demand for foreign investments in infrastructure and real estate amidst the global economic crisis. In India, this surge in demand has led to a substantial increase in the real estate segment of the REITs market. Despite the continuous rise in interest rates by the central bank, this sector remains relatively unaffected by negative impacts. The average price of homes sold in the U.S. stands at around 3.5 crore rupees, reflecting a 26% increase from the beginning of 2020.
In comparison to 2020, home prices have surged by 26%, tripling within 30 years due to escalating interest rates. As a result, homebuyers are feeling the pinch. According to data from the U.S. Federal Reserve, the average price of homes sold in the April-June quarter of this year stands at around 3.5 crore rupees, reflecting a 26% increase from the beginning of 2020. On the other hand, the average home loan rate has averaged around 7% over the past 30 years, almost three times the rate of 2.6% at the beginning of 2021.