The notion of buying your first home, building equity, and eventually moving up the property ladder is still something many young Americans aspire to, but between more stringent underwriting procedures, lingering student loan debt, competition from real estate speculators and higher interest rates, first-time buyers are being squeezed out of the market.

According to the National Association of Realtors, first-time buyers have represented around 40% of home sales over the course of the last three decades, but in the last year, that has dropped to only 30%.

The simple fact is that it’s more difficult for first-time buyers to make that big-ticket purchase right now.

Without equity from the sale of an existing home, first-timers must tap their savings for down-payment money. Putting less than 20% of the sale price down often requires the buyer to purchase mortgage insurance, which jacks up the monthly payments for years, possibly decades. And mortgage insurance premiums have increased noticeably in the last two years, meaning first-time buyers will now be paying even more if they can’t foot the full down-payment.

Meanwhile, young Americans hold a large portion of the $1 trillion in outstanding student loan debt, making it harder for some to save any money. Additionally, the increased rate of student loan defaults in recent years has had the far-ranging impact of making just about everyone with student loan debt look like a higher credit risk. The NAR says that the average credit score of a first-time buyer is now 720, compared to the 750 average of existing homeowners.

Then there are the institutional real estate investors who are speculatively snapping up bottom-dollar homes — the very ones that should appeal to first-time buyers — with the goal of eventually reselling at a higher price or turning into rental properties. First-timers stand no chance against these bank-backed buyers who pay cash and close deals almost immediately.

So people can just keep renting, right?

Sure. In some markets, renting is the same or even less than what consumers would pay for a mortgage. But there is no equity for rental tenants. So you leave your rental and have nothing to show for all the monthly payments you made over the years. On the other hand, a first-time homeowner will likely sell that first home within a decade at some sort of profit, which can then be invested either in a more expensive property or into other savings.

The Wall Street Journal reports that this drop in first-time buyers could drag down the rest of the real estate market as it attempts to right itself.

“First-time buyers are important to get the housing market to move to a new plateau,” the chief economist with Mizuho Securities USA Inc explains to the Journal. “Without them, you just get stuck at a marginal recovery environment.”

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