Economists have described the U.S. economy as K-shaped, with upper-income earners driving consumer spending and low- to middle-income earners who have confronted a panoply of rising household costs since 2020 pulling back.

The housing market has taken on the broader economy’s K-shaped character as affordability barriers reshape competition for single-family homes. A crowd is forming at the foot of the U.S. housing ladder, as once-in-a-generation equity gains being banked by repeat buyers inadvertently stifle homebuying access for the next.

A lack of affordable single-family homes plays a central role in access challenges facing first-time homebuyers. But even with economists forecasting a “generational relay” in housing turnover as baby boomers’ late-life changes bring millions of homes back onto the market, that potential shift will likely ensue in slow motion over two to three decades.

Trillions of dollars in home equity accrued to homeowners as the consequence of stimulative Federal Reserve policies enacted to shore up the economy during the COVID-19 pandemic. That Fed balance sheet expansion “could have and perhaps should have” ended sooner, Fed Chair Jerome Powell conceded in a recent speech.

The demand-side stimulus occurred amid a severe lack of affordable single-family supply, and now that accumulated equity is a bridge current homeowners deploy to cross the housing affordability gap. “Stopping sooner could have made some difference, but not likely enough to fundamentally alter the trajectory of the economy,” Powell said.

Had the Fed stopped quantitative easing sooner, though, it may have fundamentally altered access to homeownership for a generation of young buyers. As repeat buyers parlay pandemic-era equity gains into next purchases and hold onto homes for longer, delayed homeownership among first-time buyers shortens a valuable timeline over which they can build equity.

The rising costs of living were the dominant, immediate issue for voters nationwide in the 2024 presidential election. On the day he took office in January, President Donald Trump signed an executive order that specifically calls on the heads of federal agencies to “lower the cost of housing and expand housing supply,” among a wish list of household costs voters also wanted addressed.

Inflation in September was running a full percentage point higher than the Federal Reserve’s stated 2% target. Inflationary concerns have prompted a few members of the U.S. central bank to cool expectations of additional easing at their December meeting, following two consecutive months of 0.25% reductions to the federal funds rate. Those reductions were made to shore up a sustained labor market cooldown.

Generational gaps

Eight months into Trump’s second administration, the labor situation is amplifying financial pressures for a cohort of younger, first-time homebuyers already losing market share to equity-rich repeat buyers and investors.

Low rates of hiring and firing have steadied the unemployment rate around 4.3%, but a spate of recent layoff announcements from major U.S. employers have focused on thinning a managerial herd of white-collar, services-oriented workers. These positions often attract college graduates whose rising income potential historically translates into strong homebuying potential.

The share of first-time purchasers among all homebuyers has contracted sharply this year, falling to just 21% in June, according to the National Association of Realtors (NAR). The share rose from 26% in 2022 to 32% in 2023, before sliding back to 24% in July of last year.

The first-time homebuyer share averaged 40% of the market prior to the 2008 financial crisis, according to NAR, which published its annual profile of homebuyers and sellers for 2025 last week.

The trend has Seth Sprague, director of mortgage banking services at the advisory and tax audit firm Richey May, questioning whether homeownership rates peaked during the pandemic and may now face a sustained slide.

“The once in a lifetime appreciation may never occur again, and this goes back to the ‘K’ recovery,” Sprague says. He points out that low COVID-era mortgage rates have trapped equity gains behind first mortgages far below today’s interest rates above 6%, slowing the pace of sales even among repeat buyers.

Early-career workers more broadly face substantial job losses across the federal workforce, and losses are mounting in the trucking and freight sector due to the sustained housing slowdown. The manufacturing sector has contracted among Trump administration tariff policy uncertainty, and artificial intelligence investments are fueling white-collar job losses.

Early 20s was typical first-time homebuyer age in the 1980s. As of August — the last month for which official data is available due to the government shutdown — the unemployment rate among 20- to 24-year-olds was 9.2%, according to the U.S. Bureau of Labor Statistics. Among men in that age range, the rate was 9.9%, while among women it was 8.5%.

The median downpayment for a first-time homebuyer rose to 10% of the purchase price over the past year, “the highest level recorded since 1989,” according to NAR. Meanwhile, the median age of a typical first-time homebuyer jumped to 40, from 38 in 2024 and 35 in 2023. Downpayment size remained elevated among repeat buyers at 23%, the same level as 2024 but above 2023’s 19%.

‘A structural shift’

Even as overall consumer sentiment has soured in 2025, people with large stock holdings have consistently reported brighter outlooks for the state and trajectory of the U.S. economy. For many prospective first-time homebuyers, the source of downpayment funds is a combination of lifetime savings and gift funds from friends and family members, possibly supplemented with funds from downpayment assistance programs.

The rising age of first-time homebuyers effectively shrinks the number of lifetime purchases a given homebuyer may make. At the same time, a shorter timeline for building home equity in their first home threatens to lower first-time buyers’ potential purchase threshold in the future.

Until the supply constraint is eased or affordability conditions otherwise improve, a demand bottleneck will likely add to the crowd at the foot of the housing ladder, compounding the economic losses from consumers who typically would have been first-time homebuyers purchasing new furniture, lawn tools, insurance and flooring.

The first-time homebuyer purchase share is shrinking as repeat buyers hold their current homes for longer, reaching a record of 11 years over the 12 months ending in June, according to NAR. Many of the repeat buyers capitalizing on equity gains are real estate investors who purchase homes for rental portfolios or renovation and resale.

For now, the long-term challenge of adding more affordable supply means the importance and prevalence of investor-buyers in the single-family market is only going to grow, says the president of Redwood Trust, Dash Robinson, who oversees operations for CoreVest, a subsidiary that offers bridge loans to investors who renovate and resell homes for a profit.

“The role of the housing investor is probably continuing to increase in importance in the housing market,” Robinson told Scotsman Guide. Other Redwood businesses finance larger investor-owned housing projects, like build-to-rent communities. “Well-built single-family homes are just more liquid than multi. There’s a deeper bid, and I think that’s always the case.”

Investor-buyers accounted for around 3 in 10 home sales through the first two quarters of 2025, a purchase share that since October 2024 has exceeded heightened investor activity during the pandemic, according to Cotality.

As many as 85% of home investors own just five homes or fewer, making them so-called “mom and pop” landlords. In competition with first-time homebuyers, they are still repeat buyers in a stronger purchase position, with the potential to amplify price pressures in competitive markets.

“It’s been a structural shift over the past 10 or 15 years, and we expect that to continue,” Robinson added. “It’s probably not accurate to say that the country is structurally short single-family housing. I think it’s much more market-specific right now.”