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👋👋 Good morning real estate watchers! Today, we are going to talk about...

1. The median age of first-time homebuyers has jumped from 28 in 1991 to 38 today. Which means buying your first home is now something you do at the same time as getting lower back pain and realizing you have a ‘favorite’ brand of Tupperware.

2. Home values just crammed 11 years of price growth into five, proving that real estate is now aging faster than a U.S. president.

3. With mortgage rates locking homeowners in place, people are dumping their money into home renovations instead of, you know, leaving. Which means Home Depot is basically the new Disneyland for adults—except instead of meeting Mickey Mouse, you get to spend $500 on paint samples and existential dread.

Let’s go!

TOP STORY

LOCKOUT

In 1991, the median first-time homebuyer in the U.S. was 28 years old—likely fresh into their career, ready to settle down, and optimistic about building wealth through homeownership. Fast forward to 2024, and that number has jumped to 38. A first-time homebuyer today has been out of high school for two decades but is only 24 years away from being eligible for Social Security benefits.

Student debt, high rents, and soaring home prices mean Millennials and Gen Z are stuck renting indefinitely. It’s like an escape room where the only way out is to inherit property from your parents…but surprise! They just took out a reverse mortgage to buy a retirement RV.

This shift isn’t just a cyclical fluctuation. It’s a structural change in how homeownership is attained—if it’s even attainable. And as younger buyers struggle to break into the market, the pressure is mounting elsewhere: rents are surging, affordability is crumbling, and the very definition of "middle class" is being redefined in real-time.

The Locked-Out Generation

“Today’s young adults continue to face delays in homeownership compared to past generations at the same age,” wrote Jessica Lautz, Deputy Chief Economist at the National Association of Realtors (NAR). “Not only is the homeownership rate lower for those under 35 today, but the first-time buyer share is lower, and the age of first-time buyers is older than seen historically.”

There are several culprits: soaring home prices, stubbornly high mortgage rates, crushing student debt, and a lack of starter homes. The data tells the story:

• The share of first-time homebuyers has plummeted to 24%, down from a historical average of 40%.

• Home prices are rising in 90% of metro areas, outpacing wage growth.

• A staggering 49% of potential first-time buyers cite high rent as the biggest hurdle to saving for a down payment.

• Student loan debt continues to be a major obstacle, with 40% of first-time buyers saying it delayed their ability to purchase a home.

For Millennials and Gen Z, homeownership dreams feel increasingly out of reach. And for those who still harbor hope, they’re often forced to make massive financial sacrifices to scrape together enough for a down payment—if they can afford it at all.

Why Rents Are Set to Explode

When fewer people can buy, they have no choice but to rent—and that’s exactly what’s happening. The increased demand for rental housing, especially in major metro areas and booming secondary markets, is pushing up rents.

According to Realtor.com, the median rent in the U.S. is now over $2,000 per month, a 20% increase since the pandemic. Some cities have seen even sharper spikes, with places like Miami, Austin, and Phoenix experiencing 30-50% rent growth in just a few years.

Meanwhile, institutional investors—who know that younger buyers are locked out—are gobbling up single-family homes and turning them into rentals. Data from CoreLogic shows that in 2023, nearly 27% of single-family home purchases were made by investors, not individual buyers. This means that homes that would typically be entry points for younger buyers are increasingly being converted into rental properties, further shrinking supply and driving up costs.

Where Are Young Buyers Going?

Younger buyers are looking elsewhere, as high prices are shutting them out of major markets. Small towns and secondary cities have seen an influx of remote workers and priced-out Millennials fleeing expensive coastal metros.

“Remote work and a tight labor market are continuing to allow many workers to have far more geographic flexibility in where they live,” says Hamilton Lombard, a demographer at the University of Virginia’s Weldon Cooper Center.

The result? From 2010 to 2013, only 27% of rural and small metro counties saw an increase in the population of 25—to 44-year-olds. By 2024, that number had skyrocketed to 63%.

The Big Picture: A Renter Nation?

The consequences of this generational lockout are significant. Homeownership has long been the primary way Americans build wealth. Without it, younger generations face a much steeper climb toward financial stability.

Meanwhile, rents aren’t just rising—they’re becoming an inescapable trap. The more people are forced to rent, the harder it is to save for a home. And as demand outpaces supply, institutional investors continue to profit from a system that works against would-be homeowners.

“If mortgage rates remain high and home prices keep climbing, we could see an entire generation stuck renting indefinitely,” warns Lautz.

For now, the message to younger buyers is clear: the dream of homeownership isn’t dead but on life support. Until affordability improves, rents will keep climbing, institutional investors will keep expanding their portfolios, and first-time buyers will continue watching from the sidelines, wondering if they’ll ever get in the game.

SNIPPETS

1️⃣ Rocket's Remix: In a strategic $1.75 billion all-stock transaction, Rocket Companies acquired Redfin, which could significantly boost its market position and technological capabilities. The acquisition combines Redfin's impressive 50 million monthly visitors, 100 million property database, and 2,200+ agents with Rocket's robust mortgage infrastructure, potentially quadrupling Rocket's purchase loan market share from 4% to 16%. By leveraging 14 petabytes of combined data and advanced AI, the merged entity aims to create a seamless, personalized homebuying experience while generating over $200 million in run-rate synergies by 2027. This strategic partnership comes amid a challenging housing market downturn, offering Rocket a unique opportunity to consolidate its position and potentially challenge industry giants like Zillow, transforming the traditional real estate transaction process through technology and integrated services. (ResiClub)

2️⃣ Fast-Tracked Pricing: Home values surged 45.3% since February 2020, compressing 11 years of typical growth into just five years. Investors should note the standout performers: Miami led metro areas with a staggering 61.1% home value increase, followed by Charlotte, Hartford, Tampa, and San Diego. However, this growth comes with significant affordability challenges, as the monthly payment on a typical U.S. home has increased by $1,032 (80.6%) due to value appreciation and higher mortgage rates. Rent markets have also transformed, with nationwide rents growing 33.4% (nearly $500 monthly), driven primarily by single-family rentals. (Zillow)

3️⃣ Housing's Hot Mess: In 2023, approximately 6.45 million homes (5% of housing stock) were classified as inadequate, with 1.65 million severely inadequate. Older homes built before 1960 show the highest inadequacy rates, presenting potential value-added investment targets, particularly in smaller metro areas where 50.4% of moderately inadequate and 43.6% of severely inadequate homes are located. The data suggests significant potential for renovation and improvement projects, especially among the 2.8 million homeowners living in substandard conditions, many of whom have the financial capacity to invest in property upgrades. With housing inadequacy persisting and even rebounding since 2019, savvy investors could find lucrative opportunities in strategic property rehabilitation, targeting homes with structural issues or outdated systems, particularly in smaller metropolitan regions where aging housing stock creates substantial renovation potential. (NAHB)

4️⃣ Data Center Mania: Data center development is experiencing unprecedented growth, driven primarily by artificial intelligence demands. Investors should note the massive scale of recent projects: construction loans now routinely exceed $2 billion, compared to historically smaller investments under $1 billion. The market is expanding beyond traditional tech hubs, with states like Louisiana, South Carolina, and Utah emerging as attractive locations due to power availability, local government support, and geographic advantages. Key data points include over 6.3 gigawatts of data center capacity under construction in top markets—more than double the previous year—and major tech companies like Meta and Google investing billions in new facilities. However, potential investors should be aware of challenges, particularly water scarcity in Western states, which can significantly impact cooling systems and operational sustainability. (WSJ)

5️⃣ Moderating: The national median rent is $1,375, showing a modest 0.3% month-over-month increase after six consecutive monthly declines, yet still 0.4% lower year-over-year. The market is experiencing a gradual stabilization, with 75 of the top 100 cities seeing rent increases in February and 58 cities showing positive year-over-year growth. The rental landscape is being shaped by an unprecedented supply wave, with 2024 delivering the most apartment completions since the mid-1980s and nearly 800,000 units still in the construction pipeline. Sun Belt markets like Austin, Denver, and Raleigh are experiencing the steepest rent declines due to significant new inventory, while Midwestern markets like Cleveland are seeing the fastest rent growth. (Apartment List)

6️⃣ Hammer Time Economics: Home Depot's 2024 outlook reveals a resilient home improvement market despite high mortgage rates, with the company projecting 2.8% total sales growth and a focus on homeowners choosing renovation over relocation. With an average customer income of $110,000 and trillions in home equity, consumers are increasingly likely to invest in home projects rather than move, especially given the aging housing stock and continuing affordability challenges. The company's fourth-quarter sales reached $39.7 billion, a 14.1% increase, with digital sales rising 9% and transactions growing nearly 8%. Factors like extreme weather events and the "lock-in" effect from high mortgage rates drive homeowners to improve existing properties instead of purchasing new ones, creating a promising landscape for home improvement retailers like Home Depot. (Realtor.com)