Despite the incredible odds — few homes coming to market, prices that didn’t let up, scorching mortgage rates — the share of first-time homebuyers grew this year.
First-time buyers made up 32% of all homebuyers, up from last year’s 26%, , according to an annual report from the National Association of Realtors.
While this is an increase, it is well under the 38% historical average.
“First-time buyers tiptoed back into the market this year with less competition and fewer multiple-offer scenarios,” said Lautz. “While the share of first-time buyers is still near historic lows, it is higher than last year. Notably, today’s first-time buyers had household incomes nearly $25,000 above last year and are more likely to use financial assets to enter the market.”
The age of a first-time buyer this year, at 35, is down slightly from 36 last year, but above historical averages. The age of the typical repeat buyer also dropped slightly to 58 from an all-time high of 59 last year.
First-time homebuyers put significantly less down when buying a home, with a typical downpayment of 8% of the home purchase price. That is the highest share of the purchase price since 1997, when the typical downpayment was 9% for first-time buyers.
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In comparison, the typical downpayment for repeat buyers was 19%, which is the highest share since 2005, when the typical downpayment was 21%.
High mortgage rates are the main reason for last year’s increase, since buyers wanted to finance as little of the purchase price as possible at rates that were 6% or higher for most of the survey period.
But coming up with that downpayment proved difficult — and for 38% of first-time homebuyers, it was the most difficult part of the process, according to the survey.
The majority of buyers said the downpayment came from their own savings. Repeat homebuyers put proceeds from the sale of their home into the next purchase. However, 23% of first-time buyers said their downpayment included a gift or loan from friends or family.
First-time buyers increased their reliance on financial assets this year, which grew to 24% from 20% last year. This included sale of stock or bonds (11%), 401(k) plans or a pension (9%), IRA plans (2%) and sale of cryptocurrency (2%).
According to the survey, the majority of first-time buyers made financial sacrifices to purchase a home. For those who did, the most common sacrifices buyers reported were cutting spending on luxury goods, entertainment and clothes.