ArcaMax

A podcast listener writes: “For the past nine months, there have been five houses for sale on my block. As a nosey neighbor, I have attended an open house for each and have learned from the agents that while there have been a few nibbles, essentially there has been no action. Is this the case across the country? What’s the outlook for housing this fall?”

Before answering, I asked a follow up: Have any of the owners reduced their asking price? The listener said that there was only one price cut, which tells me that these sellers are not really motivated, which in some ways contributes to my overall answer of what’s going on with housing right now: It is stuck in neutral.

The peculiar nature of the pandemic housing frenzy has left prices high (though they are falling in some of the once-red-hot markets) and mortgage rates for 30–year fixed loans hovering at 6.5–7 percent, which is where they have been for about a year. On top of those basic home ownership costs, premiums for insurance have jumped, especially in flood, fire and storm-prone areas.

Those who have listed but not sold their homes are fishing in a much smaller pond because as of this summer, homeownership affordability has dropped to its lowest level on record. According to Redfin, the typical homebuyer now needs to earn $112,131 per year just to afford the median-priced home of $447,035. That's roughly $25,000 more than what the typical household actually makes. Think about that for a second, we've created a housing market where the median home is unaffordable for the median earner.

Redfin defines affordability as a buyer who assumes a mortgage and spends no more than 30% of their income on their monthly housing payment. Currently, a household earning the median income would need to spend 39% of their earnings on housing to buy the median priced home. This fact is pricing out first-time buyers, who have historically been the engine of the housing market, and has forced them to wait until they are older to take the housing plunge.

According to the National Association of Realtors (NAR), “the age of first-time buyers today is the oldest seen since NAR first started collecting data on the age of buyers in 1981. Historically, a first-time buyer has been between the ages of 28 and 33.” Additionally, the share of homes purchased by first-timers has sunk to just 24%, well below the historical average of 40%. These aren't just statistics – they represent millions of Americans who can't get their foot on the property ladder.

The post-pandemic housing market has created a divide, whereby people 55 and older are dominating. According to Ben Carlson of Ritholtz Wealth Management, “older people are responsible for nearly 60% of all housing sales and close to half of all purchases.”

The reason is obvious: They are likely among the 40% of homeowners who have no mortgage, which in turn makes them able to swallow high prices and not care about mortgage rates. Carlson warns that the middle class could be squeezed out of the market, preventing a traditional path of wealth accumulation.

If you are trying to buy your first home, don't beat yourself up if it feels impossible – the math really is working against you. To know if you are ready, run the numbers and be sure that you can manage other financial goals, like saving for retirement. If you're an older homeowner with significant equity, stop waiting for the highest price—sell that house and move on to your next adventure.

_____

_____

========

(Jill Schlesinger, CFP, is a CBS News business analyst. A former options trader and CIO of an investment advisory firm, she welcomes comments and questions at askjill@jillonmoney.com. Check her website at www.jillonmoney.com)

©2025 Tribune Content Agency, LLC