Valenti, 29, has been looking for a home to share with his fiancée since last spring. The couple, both nurses at a local hospital, had been living with their parents to save for a down payment.

They started looking for a home in the $300,000 range, but quickly discovered there weren't many homes in that price range. They adjusted their budget, which is now in the mid-$400,000s, even though mortgage rates have risen to more than 7 per cent. But there aren't many turnkey, three-bedroom, two-bath homes with two-car garages.

Recently, he lost his first bidding war to another buyer whose cash offer was more than $75,000 above the list price.

When you get to that price point, you're not getting a good deal, he said.

The 1,200-square-foot houses are selling for a lot of money, Valenti said." We wanted a turnkey house. I didn't want to come home after a 12-hour shift and start laying tile.

Valenti's dilemma is typical of the problem most first-time buyers face: entry-level homes no longer come with entry-level prices.

According to Realtor.com® and Freddie Mac, first-time buyers are facing a real estate market where the median listing price of a home has soared 38%, mortgage rates have roughly doubled, and the housing shortage has only increased over the past four years.

Monthly mortgage payments for the average home have more than doubled since 2019. First-time buyers are competing with cash-rich investors and wealthier repeat buyers.

Competition from other buyers is especially fierce for smaller, less expensive entry-level homes - because for many, that's all they can afford. These entry-level homes have historically been the gateway to the American Dream for most first-time homebuyers.

Traditional Model: Homebuyers live in these inexpensive homes for a period of time, accumulating wealth to be used for their next purchase of a better, newer, larger home, or to be passed on to future generations.

But today, many first-time buyers who were able to purchase starter homes just a few years ago can no longer afford to buy a starter home. Even homes priced within a young couple's budget can quickly become out of reach in a bidding war.

Not surprisingly, just a few years ago, an entry-level home was generally defined as a home priced under $200,000 USD. Today, they're typically closer to $400,000, says Ali Wolf, chief economist at Zonda, an architectural consulting firm. Buyers who don't make more than the median income in their area often can't afford them.

For people who haven't bought a home yet, the opportunity to become a homeowner has become harder," she said. For many Americans, an entry-level home may be out of reach."

In January 2019, households earning less than $75,000 could afford about half of the homes on the market, according to the Urban Institute, a think tank. Four years later, they can only afford 25 per cent.

Now, owning a home has become a luxury, Wolfe said.

Valenti initially wanted to buy a home before the COVID-19 pandemic, but then home prices soared. So he decided to wait for home prices to come down. However, prices stayed high and mortgage rates soared.

He says, "I never thought I'd be 30 years old and still living with my parents." Plan B is to rent. In a year, (my fiancée and I) will be married.

A young person's chances of becoming a homeowner depend not only on how much money they make, but also on whether their family and friends can help them financially. It also depends on where they buy their homes.

In the Des Moines, Nevada, area, first-time buyers can still become homeowners, but Beth Van Zee, a local real estate agent, isn't sure how long that will last.

Before the pandemic, she says, first-time buyers could find three-bedroom, two-bathroom ranch-style homes on quarter-acre lots in the city. Now, those homes sell for anywhere from $250,000 to $275,000.

Van Zee of Coldwell Banker Mid-America says first-time buyers "have to lower their expectations."" They have to go further away from the city."

Matt Curtis, a local real estate agent, said people earning less than the area's median income will be able to afford a Huntsville, Alabama, home in 2021, when mortgage rates bottom out.

Right now, the median income can't afford the median home in our area, he said.

Many buyers in the Huntsville area are looking for ways to save money. They buy properties with multiple bedrooms that can be rented out or buy new construction so builders can lower mortgage rates. Others are buying homes farther away from work and at lower prices.

Many 20- to 40-year-olds are leaving San Francisco and California's Silicon Valley because starter homes under $1 million are hard to find, said Patrick Carlisle, chief market analyst for the San Francisco Bay Area at Compass. Most starter homes in the area are condos.

In most of the U.S., a perfectly ordinary ranch-style home can sell for $300,000 or $400,000 or less, whereas here it can sell for $1.6 million to $2 million or more," Carlisle says. That's very challenging for first-time buyers."

There is a cost to buying a home, but there is also a cost to delaying buying a home.

"Homeownership is an accumulation of people's wealth, slowly over time. If you delay homeownership, you delay the start of the wealth-building process," says Danielle Hale, chief economist at Realtor.com.

Those who buy a home early in life are more likely to trade up to a more expensive home and pay off their mortgage before retirement, says Jung Choi, a senior research associate at the Urban Institute.

During the pandemic, record-low mortgage rates of around 2 per cent helped more first-time buyers become homeowners.

Homeownership rates are significantly lower than previous generations, which could have long-term implications for future wealth, she said.

Today's first-time buyers are spending more of their income to become homeowners. They also struggle with down payments.

Rising rents and general inflation are hampering homebuyers' savings efforts.A recent survey of real estate agents conducted by John Burns Research & Consulting showed that only 8 percent of homebuyers receive home assistance.

However, a loan with a lower down payment is less likely to be accepted by a seller if they have another offer with a higher down payment. This puts first-time buyers at a significant disadvantage against investors and repeat buyers, who can use their home equity to finance their next purchase.

It's a tough situation for buyers, Hale says.

While the American Dream may be just a dream for some, becoming a homeowner is not impossible.

Professionals with dual incomes who are saving money and climbing the ladder in their field are more likely to buy a home than young single-income buyers just starting out. Even those just starting out in their careers are finding ways to make it happen.

Teegan Webster, 24, and her husband, 25, bought their first home last summer. The newly built house sits on a quarter-acre, 1,500-square-foot lot in the small town of Cedar City, Utah.

Webster, who has a young son and works part-time for an educational consulting firm, has been saving for a home since she was 15. Those savings helped her and her husband, a religious educator, buy a three-bedroom, two-bathroom house without family assistance.

Webster said, "Buying a house was a lifelong dream. We wanted to start building equity and we could afford to move and thought now was the time."

However, high home prices and rising mortgage rates remained a challenge. They bid on three homes and won on the third.

They made an asking price and were surprised when the offer was accepted. Eager to sell, the sellers also paid closing costs for Webster and temporarily lowered her mortgage rate for two years.

While she loves her new home, she admits that it's not all that she dreamed it would be.

For a first home, you can't buy your dream home, Webster said.