Juan Espinoza, who may know more about this than anyone, has found that prospective homebuyers have been squeezed by rising interest and high home value.

Santa Ana, California 23-year-old resident has been on a three year search for a place to call home. His family includes four members of his own family, as well as his parents.

Espinoza explained that "we live in an apartment right at the moment, just waiting for it to fall a little bit." "I've lost track how many houses I saw, we've been outbid so numerous times."

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The family is facing two trends that have made the search especially difficult. First, home prices have increased sharply over the past year, even though they are starting to cool. And the Espinozas have been searching in Orange County where the median home price was $987,950 during the third quarter, up 11% from the year-earlier period, according to ATTOM Data.

The second is that the Espinozas are among the millions of people with multiple generations residing under one roof. Pew Research estimates that the United States had 59.7million residents living in such a housing arrangement as of March 2021. This was an increase from 14.5million in 1971.

Mortgage rates have also surged as the Federal Reserve tightens monetary policy to curb inflationary pressures not seen in about 40 years. According to Freddie Mac, the rate for a 30-year fixed mortgage was 6.66% as of Oct. 6. It was 2.99% on Oct. 7, 2021.

"We are going to make the Espinozas homeowners, but the interest rate has gone up and their buying power has fallen," said Imelda Mazo, a Murrieta, California-based real estate agent who has been trying to find new housing.

Pew found that families with members of different races are more likely share their home with multiple generations. About 25% of Asian Americans, Black Americans, and Hispanic Americans inhabited multigenerational households in 2021 compared to 13% who are white.

Residing with relatives can offer advantages: More family members residing under one roof means you can pool multiple streams of income, for instance. Grandparents can also help with childcare in families with young children.

Gary Acosta is the co-founder of and CEO of National Association of Hispanic Real Estate Professionals.

He explained that "But being a multigenerational, larger family is fraught with problems if one tries to be a homeowner."

Even if they have multiple income streams, it may be more difficult to qualify for a mortgage. Acosta explained that "the perception is these aren’t permanent scenarios so the instinct is of the underwriter to look at all other options more aggressively."

Larger families may have different needs, making it more difficult to find the ideal house when inventory is limited. Acosta stated that it's more than just the square footage. "Do you have a yard? More bedrooms?" "You want more utility."

Acosta stated that "work-at-home growth drove homebuyers to suburbs and towards homes with more utility such as extra bedrooms that can double as home offices" He also said that many institutional buyers have rushed to grab homes in affordable neighborhoods. Indeed, a May report from the National Association of Realtors found that in 2021 the institutional buyer market share rose in 84% of states, as well as in the District of Columbia.

The Espinoza Family would love a home with at minimum three bedrooms and a backyard. It would also be near Santa Ana Schools and Employment.

These problems are made worse by the fierce competition from all cash buyers for first-time homebuyers such as the Espinozas.

"We would get counteroffers," said Manzo. "[Sellers] would demand the highest and most within a specified timeframe."

She added that aggressive bidders can also offer to raise the bar to buy a property, such as waiving inspections or appraisal contingencies. And others just bring more cash to the table.

Manzo explained that in one instance, the family lost out on a home they wanted to buy to an additional buyer who was willing and able to pay $125,000 less than what they had asked.

Different states are working to create legislation that addresses the growing cost of homeownership.

Last year, Democratic California Gov. Gavin Newsom enacted the California Housing Opportunity and More Efficiency Act. The measure streamlines the process for homeowners to split their residential lot or build a duplex onto their property.

The law also makes it easier for homeowners to build accessory dwelling units onto their property, said Acosta, which can also help accommodate multigenerational households.

"These additional units are typically called granny flats and can be used as an extra bedroom or it can be a small apartment inside of another property, so it increases density," he said.

Another piece of proposed legislation in New Jersey would permit buyers bidding on foreclosed homes to make a down payment of 3.5%, provided they make that property their primary residence for at least seven years. Normally, buyers for these properties would have 20% down payment.

The next steps for the Espinoza family are to wait until the market cools sufficiently and to monitor interest rates while the Fed tightens its policy.

Manzo explained that sellers are starting to lower their prices on their listings. "They're not selling like they were six months back." "We're currently in a waiting period, but will continue to look at the future and see what happens towards end of year."