First-time home buyers made up just 22% of US home purchases in the year to June, according to the National Association of Realtors’ yearly survey released Thursday. That’s barely above last year’s record low of 21%. The typical first-time buyer is now 40, tied for the oldest on record. The usual explanation is that homes cost too much, but the price isn’t what changed.

The median home sold for about $393,300 this summer, almost exactly what it sold for in the summer of 2021. What changed is the mortgage rate. It was under 3% then; Freddie Mac’s weekly survey put it at 7.18% on Thursday.

The same house, a much bigger bill

Here is a median-priced home with 20% down and a 30-year fixed loan, then and now:

The price barely moved; the payment rose about 60%.

	Summer 2021	Now
Median sale price	$395,200	$393,300
30-year mortgage rate	2.98%	7.18%
Monthly principal and interest	$1,330	$2,131
Median household income (year)	$70,780 (2021)	$87,460 (2025)

Source: Census, Freddie Mac, via FRED; calculated by MKViz.

What would a lower rate do for the same house? At 6%, the monthly payment would be about $1,886. At 5%, about $1,689. Even that is well above the 2021 bill, which is why waiting for rates alone may not bring back the old math.

Incomes did grow, by about 24%, but the payment grew about two and a half times as fast. In mid-2021 it took about 23% of a median household’s pretax income. At this week’s rate it would take about 29%. Property taxes and insurance, left out here, push the real cost higher.

The squeeze is worse for an actual first-time buyer. Their median down payment was 9%, not 20%. With that bigger loan, the payment would have taken about 31% of median income even at this summer’s rate, which was lower than this week’s.

How long have past payment squeezes lasted?

A common rule of thumb says housing shouldn’t take more than 30% of income. We went back to 1984 and shaded every stretch when the payment on a median-priced home crossed that line:

Three long stretches above 30% since 1984; the open dot is this week.

Source: Census, Freddie Mac, via FRED; calculated by MKViz.

The three squeezes ended in different ways.

1984 to 1992, at least eight years. It was already under way when our data begins in 1984. Mortgage rates had peaked at 18.63% in 1981, and the payment took as much as 43% of income. It eased slowly as rates came down and incomes rose. Prices stalled: the median sale price dipped in 1990 and stayed flat through 1992, so it fell after inflation, but there was no crash.

Around 2006, about a year. This one was about prices, not rates, and a crash followed: national home prices fell about 27% from mid-2006 to early 2012.

2022 to early 2025. Rates more than doubled in about a year, and the payment hit 37% of income in late 2022. It eased to about 27% by this summer, on rates in the mid-6% range.

Now mortgage rates are climbing again, from 6.22% a year ago to 7.18%, after the Fed started raising its own rate again. That puts the payment at about 29% of income, right under the line.

The lesson for today: a squeeze caused by rates has ended without a crash, but slowly. Only the price-driven squeeze of 2006 was followed by a crash.

Is it worse for younger buyers?

Probably. Our measure uses median household income, which includes older homeowners and two-earner families who usually earn more than a young buyer. Census data shows only 37% of households headed by someone under 35 own their home, the lowest of any age group. For many of them, the real share of income is higher than our line.

Who is still buying?

The first-time buyers who do get in increasingly bring money from outside their paychecks:

One in 10 paid all cash, a record; one in four got family help.

Source: National Association of Realtors.

That record cash share doesn’t mean most first-timers pay cash; nine in 10 still borrowed. Many of the cash buyers had help from a death in the family: NPR, citing the survey, reports that 28% of them used an inheritance. But a buyer who needs a loan at 7.18% now often bids against a cash offer, and sellers tend to take the sure thing.

What I’d check before buying a first home

I passed on buying in the fall of 2021. Prices had already run up, and the gap between my savings and the homes I looked at was too wide. When I did buy, rates had already risen. What decided it wasn’t the price. It was the monthly payment, and whether I could keep making it if my income fell. I took a fixed rate because I couldn’t have handled it rising further.

I’d be careful with the idea of buying now and refinancing later. When I checked my own loan a few years in, other lenders beat my rate by less than a tenth of a point, not enough to pay back the closing costs for years. A refinance also needs your income, your other debts and the home’s value to cooperate when rates do fall. Treat it as a bonus. The home has to work at today’s rate.

My own checks are simple:

Will you stay at least five years?
Is the payment under a third of your take-home pay?
How many months of cash would you have left after the down payment?

And one more: figure out how long you could keep making the payment if your income dropped. If that works, the home works whether rates fall or not.

What I’m watching: mortgage rates after the Fed’s December decision, the next quarterly median sale price in late January, and whether next year’s survey shows first-time buyers coming back.

Sources

Method: For each quarter since 1984 we took the median sale price of US homes sold (Census), assumed 20% down and a 30-year fixed loan at that quarter's Freddie Mac average rate, and divided the monthly principal and interest by one-twelfth of that year's median household income (Census, latest year carried forward). Taxes and insurance are left out, so the true cost is higher. We then marked every stretch when the payment took more than 30% of income, merging dips shorter than a year. Data: Census, Freddie Mac, via FRED; National Association of Realtors.

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