Housing affordability is often the biggest challenge when saving for a down payment. Many young, first-time buyers find themselves priced out of prime housing markets.
Balancing the rising cost of living with rent and student loans while trying to save for a home has become increasingly challenging. Many young Americans are delaying buying a home until they are in a better financial position.
Others have resorted to more creative solutions, such as living with their parents to save up for a down payment or co-buying a home with friends or family.
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Though mortgage rates fell from their recent peak in October 2023, they have been inching toward 7% over the past few months. Housing prices have also increased modestly year-over-year, a combination showing little relief for buyers looking to purchase their first home.
In an uncertain market that favors cash offers and older buyers, it can be challenging for young buyers to navigate when and how to purchase a house — one of the most significant financial decisions they will make.
We spoke with Ryan Serhant, real estate broker, TV personality, and founder of brokerage firm SERHANT, about how younger buyers can find a home that fits their budget in a tough housing market.
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Location is the top factor influencing affordability
Real estate markets vary based on location, meaning that populous cities and suburbs that young adults live in are likely to be the most competitive and expensive. Realtor.com found that southern and western cities in the U.S. have seen the highest inventory increases, making them the hottest markets to watch in 2025.
Unfortunately, the lack of inventory and affordable housing options in most major coastal cities may force prospective buyers to decide between location and price.
Serhant highlights the fact that most buyers can afford a home — but it may not be in the neighborhood or city they’d like.
“I think most people can buy a home, just not where they want to and maybe not the home they thought they could get, which is upsetting,” he said. “Even right now on the Upper East Side of Manhattan, a three-bedroom home on a fourth floor costs $10 million — is that the new normal? What am I going to do personally to be able to fix that and bring prices down? And there’s not much you can do; big movers are at play.”
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Housing prices increased 3.4% from October 2023 to October 2024, and mortgage rates have dropped almost 1% from their peak of 7.79% last year. While lower mortgage rates are a welcomed improvement, they haven’t dropped enough to motivate buyers and move the needle in the housing market.
Buyers may need to consider other real estate markets that better fit their budgets, which is a difficult mindset shift.
“Prices increase over the course of history, fees increase over the course of history, and geographies change,” he continued. “Five years ago, you might have been able to afford that two-bedroom you always wanted in Chelsea, given your current pay. But today, that might have to be in Hoboken.”
“I think a resetting of expectations is needed. It's not that you can't afford a home. It's that you can't afford the home you wanted and thought you were going to get that was promised to you."
Mapping out life goals can help determine the best housing market for you
The rising cost of living is top of mind for Americans of all ages, as it is rising in virtually every state. However, certain cities and suburbs may be more budget-friendly for first-time home buyers.
Related: Dave Ramsey has blunt words on mortgage rates and buying a home now
Midwestern and southern states have the lowest cost of living and may be options for home buyers concerned with affordability. However, some nearby suburbs may be an option for younger consumers who are uninterested in uprooting their lives and moving to a more affordable state.
Serhant notes that buyers should answer big questions about their income, career trajectory, and personal life plans before committing to buying a home.
“One of the things we talk about with people all the time is level-setting expectations and being truthful and authentic with people,” he explained. “When we change the narrative to more honest communication for the average person, you start to have a healthier conversation about where you can live.”
Mapping out some of the more ambiguous personal goals can help buyers zero in on the size, location, and price of the home they can afford where they’d like to live long term.
“You need to ask yourself, ‘Where am I going to raise a family? Do I even want to have a family? What kind of job do I need to achieve this?’ I'm a big proponent of transparency and honesty.”
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