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Buying a home has long been considered the gateway for building wealth. But for many people on the threshold of homeownership, that gate remains firmly locked. 

Millennial homeownership recently crossed the 50% mark, according to data from the National Association of Realtors. But Generation Y is still lagging behind older generations, with the homeownership rate about 6 percentage points lower than other generations at the same point in their lives.

While many Millennials have secure incomes, the dream of homeownership remains hard to reach.  Even after the pandemic, low inventories and high demand have pushed home prices sky-high, while high interest raised the income bar for homeownership. It’s still possible to find your dream home, but not for your dream price. 

“Just saving for a downpayment is continuing to be very difficult,” according to Brandi Snowden, a spokesperson for the National Association of Realtors. 

In a study published in November, the NAR reported that the median household income for successful homebuyers rose 22% from 2021 to 2022, reflecting an increasingly competitive residential market. For first-time buyers, the required household income rose by over a third, to $95,000 per year.

“Generally speaking, the prices are up 25%,” said Thomas Consaga, the owner of Re/Max Ace Realty in suburban New York. “In some cases, as much as 30% or 40%.”

Consaga’s brokerage mainly serves New York’s Hudson Valley and Connecticut, where many homeowners live within commuting distance to jobs in New York City. 

The good news is that things are improving—slightly. The average price for homes sold in the United States is over $500,000, according to data compiled by the St. Louis Federal Reserve. That’s lower than the cost in 2022, but still well above the pre-pandemic average of around $375,000. 

Meanwhile, the cost of borrowing money for a home has fallen from last year’s two-decade high. The average interest rate for a 30-year mortgage is nearly 7%—a slight decline from 2022, when mortgage rates reached the highest level since 2000. 

“We had previously seen that the market was extremely competitive,” Snowden said. “This year it was slightly less competitive, so first-time home buyers were able to slip back into the market a little bit.”

Earlier generations were able to build household wealth because the costs of homeownership were lower than monthly rents, allowing homeowners to reinvest their savings and build more wealth. But those higher mortgage rates have changed the calculus for prospective homebuyers, making the market even more competitive. 

“People are reluctant to sell a house where they have a 3.5% interest rate,” Consaga says. “They don’t want to sell that house and then go out and get another one where the interest rate is 7%.”

“Millennials are purchasing homes a bit later in life,” said Theresa Szuhany, a real estate agent at Re/Max. “Often they’re already established with children and a good job. They’re not necessarily looking for a ‘starter home.’

But don’t give up just yet. Here are some ways you can still find a place of your own. 

Widen Your Horizons. In the age of hybrid work, you may be able save money by looking for homes a little further afield than you originally had in mind—and get more space to boot.   “Maybe it’s a bit more time and more money on your commute,” Consaga says, “but you can save significantly on the house.”

Arrange Financing First. With inventories low, the best homes sell quickly, making it all the more important to have a mortgage pre-approved before you start bidding. 

“Speak with a few bankers to price shop and get pre-approved,” Szuhany says. “Things move  incredibly quickly—Homes go in a weekend.”

Be Patient. Low inventories mean that it may take several months to find the home that you want. “If you really want to get into an area because you like the school district, start off renting,” Szuhany says. If you can find a month-to-month lease in your dream community, you can start setting down roots as you continue your house search. 

Save Up For a Bigger Downpayment. 

At current interest rates, every dollar you borrow will cost an additional $1.30 in interest over the lifetime of a 30-year loan. Many buyers are reducing those future costs by putting down a bigger downpayment. According to the NAR, the median downpayment in 2023 rose to 19%, the highest level in two decades.

But saving up for that downpayment might require some creative budgeting. “Something that we saw in 2022 was a record high of recent homebuyers who were previously living with parents or relatives,” Snowden said, noting that this was one way for people with limited incomes to reduce their mortgage payments.

 “They (homebuyers) are either paying more in downpayments, or they’re selling more in assets, or they’re living with friends or relatives to save up enough money,” she added.