For more than half (52%) of Americans, owning a home equates to financial success according to Empower findings, and some 40% of people have reached the financial milestone. Yet with home prices surging 54% from 2019 to 2024,¹ the dream of home ownership may have moved out of reach for some: The National Association of Realtors (NAR) reports that just 24% of home sales are to first-time buyers — a historic low.²

What’s putting the squeeze on first timers? About 2 in 3 (67%) Gen Zers and Millennials say higher home prices and mortgage rates are one of their biggest financial stressors, Empower research reveals.

Sticker shock

The average home price in the third quarter of 2024 hit $501,000 according to the St. Louis Federal Reserve — and it’s not uncommon for starter homes in coastal city markets like New York City, Los Angeles, and Seattle to be priced at double that.³ Though prices are expected to continue to rise in 2025, estimates are at a much slower pace of 4%-4.4%, which is roughly in line with median wage growth.⁴ And it’s possible the more constrained climb could open the door for would-be buyers who’ve been shut out of the real estate market due to lack of affordability.

Read more: Equity rich: How American homes built $30K-a-year in value

Coming of age

Ballooning home costs may be changing the face of the average buyer. As prices have gone up, buyers have grown up — registering both older and richer than ever.⁵ The NAR reports that the average age of homebuyers overall increased from 49 in 2023 to a record-high of 56 in 2024.⁶ For first-time buyers, the average age hit an all-time high of 38 years old in 2024 — up from 35 in 2023, and the same target age that Americans aim to purchase a home according to an Empower study.⁷ Spending power has increased, too: In the last two years, the median household income of first-time buyers increased by $26,000 to $97,000.⁸

The cost of borrowing

After lowering interest rates by a quarter point in December 2024, the Federal Reserve Bank pulled back on planned rate cuts, penciling in just two for 2025.⁹ While the move could give a slight downward nudge to mortgage rates, the impact if any is likely to be gradual. Zillow and its chief economist, Skylar Olsen, anticipate mortgage rates will remain above 6% throughout 2025, and finish the year hovering around the 6.2% mark.¹⁰

How will the borrowing climate affect potential purchasers? In 2024, nearly 3 in 4 (74%) buyers financed their home purchase, with first-time buyers financing as much as 91%, compared with 69% for repeat buyers.¹¹ The median downpayment was just 9% for first-time home buyers, compared with 23% for repeat buyers and 18% among buyers overall.¹² Despite this being the highest down payment for first-time buyers since 1997, house hunters continue to see some of the highest mortgage rates in the past decade — so it wouldn’t be a surprise if they keep an eye on mortgage rates this year.¹³

Read more: Mortgage rates and the housing market

Supply, supply, supply

Along with pricing and rates, whether first-time buyers ultimately are able to get their foot in the door may depend on another wild card: inventory. After years of housing shortages leading up to and during the pandemic, the market is gradually regaining balance, with about a four-month supply of homes for sale (typically a six-month supply is an indicator of alignment between supply and demand).¹⁴ With about 2 million potential buyers entering the market each year and some 1.6 million new builds annually, current shortages range from 1.6 million and 3.2 million homes.¹⁵