Purchasing power is up, but that’s not helping homebuyers 

What seems like a simple question — which generations have been hit harder by the cost of living — has a somewhat complicated answer, particularly when it comes to housing. 

ConsumerAffairs, a customer review and consumer news platform, recently published a report comparing today's expenses to those borne by consumers in 1974. While overall purchasing power has improved in the past 50 years, the answer to "Are we better off?" depends on what someone wants to buy and what stage of life they're at.

"Ask a retiree with a paid-off house, and the answer's probably yes. Ask someone a few years out of college, splitting rent three ways, and it's probably no," wrote Sharon Wu in the report. 

"That's the honest takeaway here — not that the numbers are wrong, just that they can only tell you so much. Purchasing power went up. Many people still feel behind. Both of those things are true at once."

Rents, home prices rose at different rates: The same dynamic is taking place in the housing market. While purchasing power improved by 22.1% in the shelter category between 1974 and 2024, the lighter economic burden only applies to renters.

Overall purchasing power increased by 73% in that 50-year period, but rent prices — after adjusting for inflation — have only increased by about 63%, making rents somewhat more affordable for the current generation. Home sale prices, however, have increased roughly 83%, making a home purchase more expensive for today's buyers.

At the same time, potential buyers are being hit with sharp increases in the cost of other necessary expenses such as healthcare and college tuition, which have outpaced purchasing power gains, making it that much harder to save for a down payment.

"When the costs that people can't easily avoid rise faster than their incomes, it's understandable that they feel squeezed," Mariano Torras, a professor and chair of the finance and economics department at Adelphi University's Robert B. Willumstad School of Business, said in the report.

Making sense of the stalled market: The relatively lower cost of renting today combined with the increased affordability challenges of buying a home helps explain the weak housing market demand over the past four years. It's also a likely factor in the rising median age of first-time buyers, which has climbed from 29 in 1981 to 40 in 2025, according to data from the National Association of Realtors.

High home prices are a key deterrent for today's buyers. In raw dollars, the median home price was $36,055 in 1974, which translates to $229,342 in 2024 dollars, according to the report. But the actual median price of a home in 2024 was $418,975, showing the stark difference in what today's homebuyers are facing.

"Many existing homeowners have benefited from decades of rising home prices," Torras noted. "Renters, meanwhile, face increasing costs and are unable to build much equity."

A mortgage rate red herring? Borrowing costs also play a role, but that may be more of a mindset shift. The ultra-low mortgage rates of the early 2020s had buyers rushing into the market, but with 30-year rates now at around 6.5%, many would-be buyers are convinced that rates are too high — even though mortgage rates remain below the historical average of above 7% and are far lower than average rates in 1974, which peaked at more than 10%.