'This is a real generational divide': housing affordability disproportionately impacts younger buyers

Housing affordability is a massive problem, especially for younger Americans. With high mortgage rates and sticker shock, many buyers are having to get creative to buy a home.

Jeff Ostrowski is an analyst for Bankrate. He says younger generations are feeling the brunt of the housing crisis because they have no equity to build on. "This is a real generational divide," Ostrowski said.

With the average home cost hovering around $400,000, wage growth hasn't come close to keeping up with the cost of housing.

So, what can first-time buyers do?

1. Consider a smaller down payment

Ostrowski says you may need to accept that saving the traditional 20% down payment on a home may be out of reach right now. "It's perfectly acceptable to put down 5% or 10%," he said. "Saving up $80,000 while you're also dealing with the skyrocketing rent and student loans and credit card debt and everything else. It's just really difficult."

2. Consider a townhouse or condo

Ostrowski says you may have to make some compromises during the house hunt so that you can get started building equity. "Maybe your first house is a townhouse or a condo," said Ostrowski. By looking at more affordable home styles your down payment will stretch further and your mortgage won't be as high.

3. Consider affordability-based migration

Another consideration is location. Ostrowski says many people are focusing their search in more up-and-coming neighborhoods or homes further into the suburbs as a way to cut costs. "Over the last few years, we've seen a lot of affordability-based migration," Ostrowski said, emphasizing that this trend has driven prices up in markets that used to be affordable.

While mortgage rates are starting to come down compared to where they were in 2023, this may make things a little harder for buyers. "That's just going to push prices up," Ostrowski said. "It's going to create more competition among first-time buyers."

These are all factors that make being patient and flexible a must, so that you can find an affordable home that fits both your needs and your budget.