It is a challenging time to become a first-time homebuyer (FTB).1
Recent age data from the National Association of Realtors (NAR) appears to confirm that young FTBs are facing desperate times. Based on the NAR’s 2025 report Profile of Home Buyers and Sellers, it finds that the typical FTB was 40 years old—9 and 7 years older than typical in 2001 and 2021 respectively. However, the New York Federal Reserve Bank Consumer Credit Panel (CCP) shows markedly different results—a 1.7 and 0.2 year reduction in average age for 2001 and 2021 respectively.
NAR’s statistics are based on their annual survey of homebuyers and sellers. For the 2025 report, covering from July 2024 to June 2025, 189,750 surveys were mailed to a “representative sample” of buyers and sellers. However, only 6,103 completed surveys were received, indicating a response rate of just 3.5 percent, with only 21 percent, or 1,281, being FTBs.
The CCP, by contrast, is based on a 5 percent random sample of all credit reports, which reports provide both borrower age and home buying history. The CCP data, for the same period as the NAR, found the average and median FTB was 36.2 and 33 years old, both well under the NAR’s age of 40.
Digging deeper into the NAR and CCP results yields helpful distributions by age bins. While both have nearly identical shares for age 35-44, the NAR’s under age 35 groups are underrepresented by 17 percentage points and the aged 45 to 74 buyers are overrepresented by 18 percentage points respectively, compared to the CCP. The NAR bias to a higher age is perhaps not surprising given that it is a mail survey with 120 questions, which does not lend itself to a high response rate by Millennials and GenZ-ers. The CCP data appears to offer a better historical view of the current position of FTBs (see graphic below). To reiterate its findings, FTB average and median age stood at 36.3 and 33 years for the period Q3:24-Q2:25, and there has been minimal FTB average age change since either 2001 or 2021.
There is an affordability crisis facing FTBs, but one based on home prices, not age. By aggressively buying mortgage-backed securities during COVID-19 and waiting until March 2022 to raise its policy rate, the Federal Reserve helped fuel a massive home price boom. With inflation approaching double digits by 2022, the Fed’s aggressive monetary tightening ultimately led to mortgage rates more than doubling. As a result, today’s FTBs face the dual challenge of historically high home prices and mortgage rates higher than what we have experienced in the last 15 years. From 2019 to 2024, the median FTB income needed to purchase a home increased by 41 percent nationally. This was about four times the rate of median U.S. household income growth (11 percent — not inflation adjusted). Lower-income FTBs are increasingly being priced out of the market.
To move the housing supply/affordability needle, the federal government needs to make starter homes great again and activate existing unused supply.
First, make starter homes great again by incentivizing the states to allow for smaller lots. Construction on smaller lots in new residential and existing subdivisions would reduce the cost and increase the supply of family starter homes. Doing so would also promote home-ownership opportunities and family formation—especially helpful for middle- and working-class households. The government could offer states a variety of $25,000 bounties. Awards for homes built on smaller single-family lots. An additional $25,000 for homes built on smaller lots within five miles of a new manufacturing site or on land purchased from the federal government. About $9 billion annually—at an average bounty per lot of $37,500—would fund 240,000 family-sized homes per year, at a nearly 20% reduction in cost. Funded could be repurposed from existing federal housing funds. The states would be incentivized to develop and implement appropriately crafted policy changes to increase the supply of more affordable, family-sized homes on smaller lots.
Second, unfreeze existing supply by exempting from the U.S income tax all capital gains on the sale of primary and secondary owner-occupied single-family homes owned for more than 2 years by someone 65 years or older. Nationally, about 9 million (31.6 percent) of homeowners over the age of 65 exceed the single filer capital gains exclusion limit. Additionally, upon death, one’s heirs have the basis in a home increased to current market value, thereby eliminating the tax on capital gains. There are trillions locked up in capital gains waiting for someone to die. This has kept many from selling, yet will ultimately yields little tax revenue to the federal government. Providing an incentive to sell and return, say, 2 million of these family sized homes to the market over ten years has the potential to free-up 200,000 move-up homes per year.
We applaud the NAR for correctly pointing out the path ahead: “Today, we must focus on policies that address the root cause of the affordability crisis: inadequate housing supply. That means both unlocking existing inventory and enabling new construction.” Let us work together to achieve it.
1 The authors thank Donghoon Lee, an economic research advisor at the New York Federal Reserve Bank, for his assistance in updating the CCP data analysis.
