Rise of First-Time Home Buyers


Over the past year, first-time home buyers have emerged as a prominent force in the real estate market. With an increased willingness to make larger down payments, this group has made a significant impact. However, it is important to note that higher mortgage rates have had both positive and negative effects on their endeavors.

Growing Presence of First-Time Buyers

According to the National Association of Realtors’ annual Profile of Home Buyers and Sellers, approximately one-third of home buyers in the previous year were purchasing a property for the first time. This data is based on responses from 6,817 homeowners who bought a house between July 2022 and June 2023.

Mixed Consequences of Market Conditions

While the proportion of first-time buyers increased, it coincided with a decline in overall sales volume. This suggests that repeat buyers withdrew from the market due to rising mortgage rates surpassing their pandemic-era lows. Unadjusted NAR data reveals that home sales were roughly 25% lower in the year ending June 2023 compared to the preceding year.

The trade group commented on this shift, stating, “This year marked the end of the Covid-19 pandemic-induced housing boom.” They further acknowledged the challenges faced by buyers in a market dominated by limited housing inventory and affordability constraints.

Resilience and Opportunity

Despite these obstacles, first-time buyers accounted for 32% of purchases, significantly higher than the previous year’s record-low of 26%. Although this falls short of the historic norm of 38%, the increase indicates that first-timers capitalized on the slowdown in the housing market. The trade group highlighted this achievement by stating, “As competition receded due to higher borrowing costs, first-time buyers had an opportunity to enter the market.”

In conclusion, the rise of first-time home buyers demonstrates their tenacity and adaptability in navigating a challenging real estate landscape.

First-Time Buyers Increase Down Payment Amidst Competitive Market

According to a recent survey by the Realtors association, first-time home buyers have upped their game by increasing the median down payment to 8%. This figure is higher than the 6% median observed in 2022 and represents the largest down payment since 1997.

One reason behind this trend is the desire of first-time buyers to gain a competitive edge against all-cash buyers, who accounted for 20% of sales. Additionally, the increased down payment could also serve as a strategy to alleviate the impact of higher mortgage rates and soaring home prices.

Based on an analysis of historical data from the National Association of Realtors (NAR) and Freddie Mac, the average home price and mortgage rate in the 12 months leading up to June 2023 amounted to approximately $382,000 and 6.3% respectively. These figures mark an increase from about $372,000 and 3.7% in the previous year.

However, saving for a down payment proved to be a significant challenge for 38% of first-time buyers. Despite this obstacle, they persevered, with the typical first-time buyer being 35 years old, the second-highest recorded age after the average of 36 in 2022.

When it comes to funding their down payments, buyers primarily relied on savings. However, it’s worth noting that 19% of first-time buyers also reported receiving a financial gift from a relative or friend. Furthermore, the percentage of first-time buyers utilizing financial assets such as stocks, bonds, retirement savings, or cryptocurrency increased from 20% to 24% compared to last year.

It’s clear that first-time buyers are adapting to the challenging market conditions by making larger down payments. Their determination to navigate the competitive landscape is commendable, emphasizing the importance of careful financial planning and resourceful strategies.

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