Morgan and Tyler Brasfield are "dying" to buy a home, especially since the birth of their second child six months ago. Unfortunately they just don't have the cash to compete in today's San Francisco housing market, so they continue to rent.
"People are coming in with full-cash offers that are significantly higher than asking," said Morgan, as she corralled her two-year-old on the playground. "So if you find a home for a little over a million, which would be a fixer-upper here, you can expect to pay two to three hundred thousand more than asking."
But even if they were looking in a less pricey, less competitive area, Morgan admits they would still have trouble coming up with the down payment; Tyler, who is now working in finance, just graduated from business school a year ago.
"We need to focus on the student loans right now," said Morgan.
While the Bay Area saw the weakest December sales in six years, according to DataQuick, prices there continue to rise. That is largely due to tight supply and investor cash. The median home price in the Bay Area was up 24 percent from December of 2012. Buyers like the Brasfields can't compete with that.
While the numbers are not quite as dramatic nationwide, the story is the same. First-time homebuyers are left out of the housing recovery. They accounted for just 27 percent of sales nationally in December, the lowest since the National Association of Realtors began tracking this cohort in 2008.
First-timers historically account for about 40 percent of the market. Their reasons for dropping out are manifold: High student loan debt, poor employment and poor wage growth, and less-than-pristine credit.
First-time buyers also tend to purchase lower-priced homes, but all-cash investors have cornered the market on those, leaving little behind. All-cash purchases accounted for 42.1 percent of all U.S. residential sales in December, up from 38.1 percent in November, and up from 18.0 percent in December 2012, according to a new report from RealtyTrac.
(Read more: Real estate's least sexy sector is red hot)
While the Realtors show a smaller share of all-cash buyers, 32 percent, they don't capture sales of homes outside their "multiple listing services," which would include sales of homes at auctions or by banks. In any case, the share is a, "phenomenal, very, very high percentage," according to the Realtors' chief economist, Lawrence Yun.
Distressed properties made up just over 16 percent of all U.S. home sales in 2013, up from 14.5 percent in 2012, according to RealtyTrac. These homes tend to be priced under $100,000, a sweet spot for first-time buyers. Sales of homes in that price category fell 11.5 percent in December from a year ago, according to the Realtors, while sales of homes priced above $250,000 jumped over 14 percent.
Tough credit is also hitting younger buyers hardest. Today's mortgage lenders require higher down payments, and while first-time buyers used to get help from their parents, that well has dried up for some, as older Americans lost much of their savings in the recent financial crisis.
First-time buyers often turn to FHA loans, the government mortgage insurer, but premiums and fees there have gone up dramatically in the past year, and FHA's share of the market has dropped accordingly.
On the brighter side, another report from Inside Mortgage Finance shows Fannie Mae and Freddie Mac easing the doors open a bit more to first-time buyers. The share of Fannie Mae/Freddie Mac financing for first-time homebuyers hit 19.5 percent in December. That compared with 14.1 percent a year earlier.
Credit aside, there is still the simple fact that house prices shot up like a rocket in 2013, well into the double digits nationally.
"Below the surface of last year's market, a number of unsettling trends started to emerge as a result of rapid and ultimately unsustainable appreciation, setting up a bit of a mixed bag for 2014," said Zillow's chief economist, Stan Humphries.
"Affordability issues will help put the brakes on many markets that saw huge appreciation rates, like California and the Southwest, creating volatility that could potentially cause whiplash for homebuyers and sellers."
—By CNBC's Diana Olick. Follow her on Twitter @Diana_Olick.
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