Aaron Solomon and his wife briefly considered purchasing their first home in 2022, when the national homebuying frenzy was in full swing. But they laughed at the prices, which struck them as exorbitant for even a modest house. They decided to bide their time, moving from their fourth-story walkup apartment in Brooklyn to a more spacious rental home in Madison, New Jersey, about 45 minutes outside New York City.

"We were like, 'Yeah this is crazy. It's going to come down at some point,'" says Solomon, a 37-year-old who works in sales. "And it didn't."

When the couple begrudgingly picked up their search in the summer of 2024, the market still wasn't doing them any favors. Though rising mortgage rates had forced many buyers to the sidelines, prices in their area had held firm due to the lack of available homes. Solomon and his wife arrived at a harsh realization: "I guess we really need to rethink our budget," he recalls. Armed with a spreadsheet that detailed the maximum amount they'd be willing to pay, they browsed listings for more than a year until they found the winner: an idyllic four-bedroom in Morristown, New Jersey, with a backyard that opens up to the surrounding woods.

Their "forever home" came at a steep cost. Though they bargained the asking price down after an inspection, it still sat at $1 million when they reached the closing table in January. Solomon and his wife were careful to avoid overextending themselves; still, their monthly payments are now $6,000, compared to $4,000 in rent at their old place. The sticker price alone, Solomon says, would have been unimaginable in the pre-pandemic days.

"I'm still like, 'Holy crap, how did we buy a home for a million dollars?'" Solomon tells me.

Solomon isn't alone in his disbelief. A recent analysis of census data by the Economic Innovation Group, a bipartisan think tank, found that new homeowners are spending a far larger share of their income on housing than those who purchased years ago. In 2024, the latest data available, housing costs ate up 26% of the budget for people who bought a home in the previous 12 months, compared to just 20% for longer-tenured homeowners. The six percentage-point difference is the largest on record since at least 1990, the earliest year for which data exists. If that gap doesn't sound all that wide, consider that 6% of the median household income is over $5,000 a year, or more than half of a typical household's annual spending on food.

"That six percentage-point difference really adds up to, practically speaking, a lot of your money," says Jess Remington, a research analyst at EIG who focuses on housing policy.

This "new homeowner penalty," as Remington calls it, is the latest evidence of how much the landscape has shifted for buyers over the past few years. Rising home prices, a surge in borrowing rates, and spikes in costly but overlooked expenses like insurance and taxes have conspired to make homeownership a stretch even for buyers with healthy savings and a helping hand from family.

I'm still like, 'Holy crap, how did we buy a home for a million dollars?' Aaron Solomon, New Jersey homebuyer

Economists and real estate agents tell me there's no indication that the situation for new homeowners has improved in the past couple of years: Mortgage rates haven't dropped significantly, dashing hopes of cheaper monthly payments. Given the aging population and home prices that remain at or near record highs in much of the country, buyers these days may face a longer climb to the kinds of housing wealth gains enjoyed by their predecessors — if they ever see them at all. The financial gut-punch of the "new homeowner penalty," meanwhile, could linger long after they settle into their new place.

"There are other options and ways that they could catch up," Remington says. "But for now, the current trajectory in the short term — I'd say they're just at a disadvantage. They're screwed for a while."

New homeowners have almost always spent more of their income on housing than the rest of the pack. They're typically younger and earn less than more tenured owners, and their mortgage payments are often larger due to rising home values. The gap between housing costs for new and existing homeowners has hovered between two and four percentage points over the past three decades, with one brief exception: In the wake of the Great Recession, buyers scooped up homes at steep discounts and spent a slightly smaller share of their income on housing than existing owners. By 2017, however, the usual gap was back.

Several factors have put new buyers on shakier ground in recent years. For one thing, sticker prices have remained high — the median sale price nationwide is up roughly 24% since 2019, per Census data. There are key differences as you look across the map: Prices are down from their peak in some once-overheated markets (think Austin or Phoenix) where builders delivered lots of new homes, but in other areas like the Midwest and Northeast, where there was no wave of construction, eyewatering numbers are the new normal. Those high list prices make it harder to save up the chunk of cash needed to break into the market. Adjusting for inflation, the average down payment grew by 30% from 2019 to 2024, an EIG analysis found, while the average household income grew by less than 1%.

Even if you gather enough in a savings account to make the leap, the monthly payments for your dream home will likely be a heavier burden. The Federal Reserve's inflation-fighting interest rate hikes made all kinds of loans, including mortgages, far more expensive. Between 2021 and 2024, the typical mortgage rate for new buyers jumped from 3% to 6.6%, the Urban Institute found, a massive cost increase for those who got in later. Though mortgage rates drifted downward over the past year, a recent spike due to the war in Iran has dampened the mood — the typical rate for a loan is back up to roughly 6.4%, according to Freddie Mac. Some quick-and-dirty math illustrates the pain: Say you buy a $400,000 house, put 20% down, and get a typical 30-year loan to cover the rest. Someone who buys at today's going rate would pay roughly $650 more each month than someone who grabbed the same home in 2021. While longtime owners had the chance to refinance when rates plummeted, new homeowners are stuck.

"There is a housing affordability crisis — a lot of people get that," Remington tells me. "But it's really not hitting everybody equally."

Given the financial resources needed to become a homeowner, it should come as no surprise that wealthier house hunters are grabbing a bigger piece of the pie. The share of homebuyers earning more than 120% of the median income in their area — a standard measure of affordability — grew by three percentage points from 2019 to 2024, the Urban Institute found, while the share earning less than 80% of the area median income fell by almost four percentage points.

"That really causes a greater gap between those who can enter into homeownership and those who are left as renters," Jung Hyun Choi, a housing researcher at the Urban Institute, tells me.

The affordability gap between new homeowners and incumbents has widened nationwide, but some states are worse off than others. The Northeast and West, long considered the epicenters of the housing supply crisis, once again stand out. In Rhode Island, the difference is a whopping 10 percentage points, the second widest behind only Hawaii. A report published last year by HousingWorks RI at Roger Williams University found that in order to affordably buy a typical home in any Rhode Island municipality, a household would need to earn roughly $130,000 annually — more than $40,000 above the state's median household income, and $17,000 more than the typical owner's income.

"That's not a matter of people should work harder, or people should prioritize their savings, or should spend differently. There's limited resources," says Melina Lodge, the executive director of the Housing Network of Rhode Island, a nonprofit advocacy group. She adds that other rising costs — gas, health insurance, childcare — are also eating into household budgets.

"There's only so much to cut in a life that's very expensive."

Some buyers may still find an opening if they don't offer top dollar. Steph Mahon, the principal agent at Dwell New Jersey and the Solomons' representative in their home hunt, says she's had two clients win out recently thanks to buyer's remorse — the top bidder pulls out (perhaps after crunching the numbers), and the sellers turn to the next best offer. Buyers these days are also more willing to compromise, she says, searching at a lower price point or looking farther afield rather than canceling the hunt altogether.

"I see compromising way more than I see stretching," Mahon tells me.

Collin Whelan, an agent in suburban Philadelphia, says most homes are still getting multiple offers, especially those priced under $1 million. He advises clients to consider fixer-uppers as an alternative to the stiff competition.

"Unfortunately, the inventory is next to nothing because homeowners are sitting on properties with very low interest rates, or sitting on tons of equity because they've been there for decades," Whelan tells me. If a client is eyeing a maximum sticker price of $500,000, he might nudge them to look at homes in the $250,000 to $350,000 range, he says, and use the balance for renovations.

"I just think the buyers are becoming more realistic about what they can and can't afford," Whelan tells me.

A drop in mortgage rates might help existing homeowners who are eager to refinance, Remington says, but it probably wouldn't do much for those still trying to break into the market, since cheaper loans would likely stoke demand and drive up prices. Proposed cuts to property taxes, she says, would also benefit older homeowners more than recent buyers. The primary solution to the "new homeowner penalty," Remington says, is building more housing in the places where people want to live.

In this respect, Remington says she's been encouraged by a nationwide wave of reforms designed to boost housing construction, including streamlined home permitting and tweaks to zoning rules. Lodge, of the Housing Network of Rhode Island, tells me she's also hopeful about recent policy changes, though the downstream effects may take time to materialize.

"I think people sometimes are like, 'Well, we did a thing, and why isn't that thing reflected in the landscape?'" she says. "It takes a minute for all the cogs in the machine to catch up."

An influx of supply might tamp down prices and lead to more humble equity gains — "the price won't be as crazily inflated 30 years from now," Remington tells me. But if a homeowner wants to downsize, or move closer to their grandkids, or upgrade, "they will probably have way more options to choose from, and be able to find something cheaper when it's time for them to move," Remington tells me. "So I do think we're moving in a good direction."

Lodge can't help but reflect on her own stroke of luck, though. In 2018, she bought her house in Rhode Island for $270,000. Its value has doubled in eight years, a possibility that she realizes is vanishingly small for those buying at today's inflated prices.

"I don't think that same opportunity will exist in the near future," Lodge says.

James Rodriguez is a correspondent on Business Insider's Discourse team.