It comes as no surprise that first-time homebuyers face tremendous challenges in today’s economy. As a matter of fact, the obstacles to homeownership remain the most challenging they have been in decades. To get a better perspective on proceedings, let’s rewind to late 2020/2021 when the pandemic was running rampant. During this time, the prices of homes across the United States spiked.
Coupled with low housing supply, overwhelming demand, and rising inflation, housing affordability tanked. The situation became untenable as global businesses shuttered operations and mass layoffs took place. Based on a 2019 study by a New York Fed survey of consumers, some 20% of people believed that home prices would rise by 20% + through 2025. But that hardly tells the truth of what happened; home prices increased on average by 50% across the United States through December 2024.
Equally concerning was the unaffordability of 30-year fixed mortgage rates. They rose sharply from an average of 3.7% (2019 figures) to around 6.9% in December 2024. Just to put things into perspective, a $250,000 home mortgage in 2019 would cost an average of $1,151 per month at 3.7%, but $1,647 per month in December 2024 at 6.9%. That’s a startling increase of about $496 every month. More concerning is the fact that Redfin now pegs the median home price in the United States at $443,019 as of July 2025 (up 1.2% from July 2024).
In terms of the current interest rates listed above, the pre- and post-repayments are as follows.
- At 3.7%: about $2,043 per month (principal & interest, 30-year fixed).
- At 6.9%: about $2,923 per month (principal & interest, 30-year fixed).
- What’s the Difference? Roughly $880 more each month.
*Take Note: The total mortgage payment includes additional costs, such as property taxes, homeowner’s insurance, mortgage insurance, and homeowner’s association dues (if applicable).
Are Conditions Changing in Today’s Market for Special Groups?
For many prospective buyers, especially those with military service backgrounds, one of the few bright spots in this challenging landscape has been the availability of programs designed to reduce entry barriers. A VA loan offers a meaningful advantage in today’s market by lowering or even eliminating down payment requirements and providing competitive interest rates compared to traditional financing. This is a boon to veterans who would otherwise have to settle for run-of-the-mill mortgage applications with no special terms.
These VA mortgage benefits help offset the sharp rise in housing costs and mortgage payments, giving qualified buyers a more straightforward path to sustainable homeownership. We cannot lose sight of the fact that affordability pressures remain high nationwide, and VA-backed financing continues to provide a critical edge for first-time homebuyers seeking stability in an otherwise turbulent housing environment. These unique programs confer valuable benefits to veterans and their families.
Macroeconomic Realities: The FFR Rate Reduction Shows Promise
Fortunately, conditions are improving slightly, given the recent reduction in the FFR (Federal Funds Rate) by 0.25 percentage points. This signals the Fed’s willingness to begin quantitative easing by making it more affordable for potential homebuyers to apply for mortgages. By increasing opportunities to expand credit through affordability, more people will consider homeownership as an option.
Previously, limited housing supply, inflated prices, and unaffordable mortgages made homeownership a non-starter. Sadly, income has not kept pace with the price rises in homes available for sale. This is especially true for young individuals who start low and enjoy rapid wage growth throughout their career. Getting into the housing market is more difficult than ever, but moves are afoot to reinvigorate the process.
JPMorganChase released a comprehensive analysis on homeownership trends and found that the average age of first-time homeowners increased to 38 years old in 2024. This data was provided by the National Association of Realtors. BEA, FHFA, Freddie Mac, and JPMorganChase Institute calculations presented a graphic on the five-year changes in housing costs and incomes.
For the period 2019–2024, they postulated that affordability is deteriorating at a pace not seen in decades. Housing costs, driven by surging prices and rising mortgage rates, shot up far faster than disposable incomes. The net effect was a dramatic squeeze on first-time buyers, with costs soaring while paychecks lagged. This meant that affordability was in the worst position in recent memory.
What Percentage of Americans Rent vs Own Their Own Homes?
The most up-to-date statistics in the US indicate that clear trends exist between rental patterns and homeownership. The US population is diverse, with disparities between household categories, geographic locales, and across racial and ethnic lines. Overall, some 65.8% of Americans own their own homes. These rates are highest in the Midwest, particularly in parts of the United States, at 70.8%, and lowest in western states like California, Nevada, Arizona, and New Mexico, at 60.4% on average.
The most significant disparity exists between white and black households. Whites have a homeownership rate of 73.3% compared to 44.1% for Black Americans. Hispanic and Asian Americans fall in between those figures at 50.6% and 60.5% respectively. Interestingly, homeownership among Black people increased to 44.1% in 2024, but the divergence between black and white home ownership at 30 percentage points is the highest it has ever been.
Given that the median household income in the United States is $90,000 for homeowners and just $40,000 for those who rent, inequalities exist. In 2022, the standard loan size for homebuyers was $373,463, with an average down payment of 13%. Some 10% of homebuyers used VA loans to finance their purchases. Across the United States, the Empire State has the highest rent, with an average price of $4,300 for a single-bedroom apartment.
The standard credit score of homeowners is 754, while renters boast a lower score of 638. In terms of affordability of rent/loan repayment to income, renters spend 30% plus of their household income on rent, while 16.4% of homeowners’ income goes towards housing costs. Viewed in perspective, homeownership confers myriad benefits over renting. Paying down a fixed asset over time builds generational wealth, financial security, and serves as a springboard to success in many other aspects of life.
