First-Time Homebuying Hits a Record Low

Written by Ashley Sutphin Posted On Tuesday, 06 December 2022 00:00

Over the past year, there was so much competition to buy a home that it felt out of reach for a lot of would-be buyers. Buyers were up against investors and other purchasers, and often their competition was coming in armed with all-cash offers that were well-above asking price.

Home prices hit record highs throughout the country, meaning homeownership became an increasingly out-of-reach dream.

Only around one-quarter of all home sales in 2022 were attributed to buyers who were first-timers, according to data from the National Association of Realtors, in their 2022 Profile of Home Buyers and Sellers. That was the lowest percentage in the report's history, which has been conducted for 41 years. During the previous year, first-time buyers represented around 34% of all purchasers.

The report is based on a survey from the NAR of more than 4,850 buyers who purchased a primary home between July 2021 and June 2022.

The report didn't include investment and vacation home purchases, and income data was from 2021.

The Vice President of Research at NAR said the drop in first-time buyers is a record low, although it’s not exactly a surprise, largely because of the affordability crisis. There’s also a lack of inventory, and the rising rent costs have made it hard for buyers to save a down payment.

The housing market hasn’t just been a challenge for first-time buyers. Even experienced buyers have been dealing with high prices, bidding wars, and the need to waive contingencies to have a seller consider their offer. Inflation, increasing mortgage interest rates, and higher rents are also affecting the budget of seasoned buyers.

One thing some first-time buyers did was move farther out from where they might have otherwise—for example, they moved an average of 50 miles from their previous homes to get more for their money. Because of remote work, or only having to commute to offices sometimes, there was more freedom to go to places that would provide square footage and outdoor space.

In the NAR report, the interest in living in a bigger city declined, as just 10% of the buyers in the survey closed in urban areas. That figure was 13% last year. Small towns gained popularity, going from 21% of sales in 2021 to 29% in 2022, and rural communities saw a jump from 12% to 19%.

The most considerable portion of all the sales was still in the suburbs. Still, suburban home sales decreased 51% from the previous year because of surging prices and a lack of availability and inventory.

The first-time homebuyers who could overcome the odds of their peers tended to be older than in previous years. These first-time buyers may have more time to save money or move upward in their careers. The median age of a first-time buyer was 36—up from 33 the year before.

Among first-time homebuyers in the survey, many did struggle to save a down payment. The average was around 6% of the purchase price for first-time buyers, and about 22% said they relied on loans or gifts.

Almost all first-time buyers—97%, needed a mortgage.

Their homes were also smaller. The median home size for first-time buyers was 1,550 square feet, compared to a median of 1,800 square feet for all buyers.

Finally, around 29% of first-time home buyers were single, 18% were unmarried couples, and 5% were other types of households, such as roommates or friends.

Rate this item
(0 votes)

Realty Times

From buying and selling advice for consumers to money-making tips for Agents, our content, updated daily, has made Realty Times® a must-read, and see, for anyone involved in Real Estate.