Home Prices Rise, and Single People Are Running Out of Houses to Buy

With mortgage rates remaining low, plenty of singles are seeking homes. Often, they are scraping together down payments on their own, so they are looking for more affordable properties.

But, as the number of single people looking to put down roots is rising, the pool of available options is shrinking. The supply of entry-level housing, which Freddie Mac defines as homes up to 1,400 square feet, is near a five-decade low.

The result is bidding wars on properties, with some young people being cut out of the wealth growth that homeownership can bring. At the same time, older Americans hoping to downsize are now often stuck in their homes longer, adding to a broader supply shortage.

“We’re just not building that many [smaller homes], despite what you hear about ‘tiny homes’ and that sort of thing,” said Len Kiefer, deputy chief economist at Freddie Mac. “There’s not that much new supply coming online, so the existing supply—which is aging—is fiercely competed over.”

Faced with declining options, some single Americans are holding off on buying. Others are making major life changes to become homeowners.

Jonathan Morgan, a 34-year-old software engineer in Austin, Texas, has been renting a two-bedroom apartment, first with a roommate and more recently living alone with his dog.

Mr. Morgan says he has long wanted to own his own home, but he has grown dismayed hearing friends describe “horror stories” of trying to compete in Austin’s roaring housing market.

“I truly feel like I’ll never be able to catch up to the Austin market to buy a home, and working from home and owning my home is very important to me,” he said. “How much I’m able to save isn’t fast enough for how fast costs are rising.”

Rather than attempt a purchase in Austin, Mr. Morgan decided to make a bigger change: He’s soon moving to Grand Rapids, Mich., where he can still work remotely. According to data from the National Association of Realtors, the median home price in the Grand Rapids-Wyoming metropolitan area is $278,300. In the Austin-Round Rock area, the median home price is $515,100.

Working with a real estate agent in Grand Rapids, Mr. Morgan said he has seen multiple houses that fit his budget and his preferences: a multi-bedroom, single-family home with space for his dog and a home office.

For home purchases in September 2021, the median sales price for homes purchased by single buyers was $265,000, according to a data analysis from the Housing Center at the American Enterprise Institute. The overall national median home price hit $352,800 last month, according to NAR.

Andrew Ragusa, chief executive and broker of REMI Realty in Plainview, N.Y., has seen the single-buyer issue over the years in real estate. He is now hoping to buy as a single person himself.

Given the rise in prices, he said he would wait until the new year to buy, when he has processed a few more real-estate deals. He’s looking at single-family homes in the $700,000 range, allowing him some wiggle room, should prices continue to rise on Long Island.

Some buyers he has worked with are concerned about shouldering such a big financial responsibility on their own, he said. Others are waiting for a partner—or a group of friends—before committing to a 30-year mortgage.

Still, Mr. Ragusa, 36, said a large group of people young and old have been willing to put those concerns aside recently to capitalize on the low-rate environment.

“We need to make present-time decisions,” he said.

Young singles aren’t the only ones struggling to find properties.

Research from Freddie Mac found that more than a third of sole-person households are headed by members of the baby boomer generation.

“Many of them may have started out as dual-person households, but because of mortality, divorce or separation, they became sole-person households,” Mr. Kiefer said. “That means they’re not going out and buying a new house or a new condo, they’re living in their existing home and becoming a new sole-person household.”

Some of these older buyers are now hoping to downsize from a bigger family home to something smaller. They are finding their profit from the sale of their home won’t stretch as far as it did in years past, Mr. Kiefer said.

“The challenge with downsizing is you have to find something to downsize to,” said Mr. Kiefer.

As the size of new construction grows, single buyers will find themselves competing for fewer small-size houses, and they’ll be competing alongside first-time buyers, too, Mr. Kiefer said.

Mr. Morgan said moving to Grand Rapids from a more expensive market like Austin allowed him greater flexibility in his budget—he’s looking at homes around $300,000. He said he isn’t too concerned about being able to handle the financial responsibility on his own.

Many months of pandemic tumult have solidified his faith in his own resilience, he added.

“I honestly don’t have any concerns or fears about owning a house all by myself,” he said. “If s— hits the fan, I’ve been through enough in life to know I could rebound.”

Write to Julia Carpenter at Julia.Carpenter@wsj.com