By Julian Mark | The Washington Post
After only a few months, Chris Swanson is sick of shopping for houses in what the 39-year-old calls a “dumpster fire” of a market for first-time buyers like himself.
Though he has a steady job and has paid off his student loans, it feels as though he’s two decades too late: He missed out on rock-bottom interest rates, and homes are far more expensive. Landing on the one property that will fit his needs and his budget is daunting enough, but there’s also pressure to move fast. “I’m in that weird position,” said Swanson, a marketing professional from Mentor, Ohio.
Homeownership — the main driver of wealth for most Americans — is out of reach for large swaths of the population. But the pinch is most pronounced for millennials, who are buying homes at a slower pace than those before them. Baby boomers, in fact, represented the largest share of home buyers this year — a spot millennials had held since 2014 — according to research by the National Association of Realtors.
“Boomers are absolutely in the driver’s seat,” said Jessica Lautz, deputy chief economist at the association, because they have built up home equity and can pay in cash. “Unfortunately, that has pushed many millennials to the sidelines.”
Those born between 1981 and 1996 have been called the “unluckiest generation.” Since entering the workforce, they have experienced the slowest economic growth of any age group. They have also been weighed down by student debt and child-care costs, Lautz said.
Rising interest rates and persistently high asking prices have further eroded their buying power. The median U.S. home sold for $416,100 in the second quarter of 2023, a 26 percent jump since early 2020, Federal Reserve data shows. Median sales prices were significantly higher in the Northeast ($789,600) and the West ($547,900).
Meanwhile, the average 30-year, fixed-rate mortgage is now hovering near 7 percent, nearly three times the 2.6 percent recorded in early 2021.
As a result, first-time home buyers are older, with a median age of 36, Lautz said. That is the oldest since the National Association of Realtors started keeping track in 1981, when the median age was 29. As the age climbed, she noted, the share of first-time home buyers sank to “historic lows.”
The high interest rates are “a real burden on young people who don’t have the high salaries of old folks like me,” said Joseph Gyourko, 67, a professor of real estate at the University of Pennsylvania’s Wharton School. “You can’t get around it, and you’ve got to make a decision: Do I value the house enough?”
‘Marry the house, date the rate’
A self-described economic Luddite who is wary of debt, Swanson finds himself “completely lost” in the home-buying process. He’s taking in all the advice pouring in from real estate professionals, friends and colleagues, but he was put off by one line making the rounds:
Marry the house, date the rate.
Meaning: Buy now, refinance later.
“I don’t want to have someone … pushing me to make a decision I’m not 100 percent comfortable with to begin with,” he said.
The “date the rate” mantra has bounced around real estate circles since last year, when the Federal Reserve was well into its most aggressive rate-hike campaign in decades to crush inflation.
The line was meant to “give comfort to home buyers that this may not last forever,” said Anne Stewart, a real estate agent in Portland, Ore. Yet in August 2022, she posted a TikTok pushing back against the advice. The phrase was being abused, she told The Washington Post, “because it didn’t really give a big enough picture for people to understand” the complexities of the housing market.
Not only is it uncertain when — and by how much — mortgage rates will drop, but buyers should also understand that refinancing comes with hefty costs, she said. If rates drop, homeowners would need to calculate whether refinancing would pay off, she said. Though the cost depends on the specific loan, the average home refinance runs about $5,000 and can take more than a year to pay for itself.
Stewart offers a different message: Accept that interest rates are high, and plan accordingly.
Dating the rate isn’t crazy advice, but it’s risky, said Gyourko, the Wharton professor. It’s sensible when buying a home may be the best option for people who want to start families and need more square footage than an apartment typically provides, he said. It also might apply if the home buyer really loves the house.
In either case, he said, “be prepared to marry the rate.”
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