First-time home buyers showed up in greater force over the past year—and brought more cash to the table for down payments. It was a mixed bag, though: higher mortgage rates both helped and hurt this group.
Roughly one-third of home buyers last year bought for the first time, according to the National Association of Realtors’ annual Profile of Home Buyers and Sellers. The survey’s results are based on responses from 6,817 homeowners who purchased a home between July 2022 and June 2023.
While first-time buyers gained share, it came at a time when overall volume sank—suggesting that repeat-buyers backed out of the market as mortgage rates rose well above their pandemic lows. Home sales were roughly 25% lower in the year ended June 2023 than in the same period one year prior, unadjusted NAR data show.
“This year marked the end of the Covid-19 pandemic-induced housing boom,” the trade group wrote. “Data in this year’s report continues to show buyers encountering a housing market with limited housing inventory and affordability constraints.”
At 32%, the first-time buyer’s share of purchases was higher than the survey-low 26% in the prior year. While the numbers were below the historic norm of 38%, the increase suggests first-timers may have used the housing market slowdown to their advantage. “As competition in the market receded due to higher borrowing costs, first-time buyers had an opportunity to enter the market,” the trade group wrote.
First-time buyers upped the cash they brought to the table, the survey shows. The group’s median down payment was 8%, which was higher than 2022’s 6% median and the largest since 1997, according to the trade group.
The increased down payment may have come as first-timers sought a competitive edge against all-cash buyers, who represented 20% of sales, the Realtors association said. It also may have been a way to mitigate the sting of higher rates and home prices. The average home price and mortgage rate in the 12 months ended June 2023 was roughly $382,000 and 6.3%, according to a Barron’s analysis of historic NAR and
Freddie Mac
data—up from about $372,000 and 3.7% in the year prior.
That doesn’t mean it was easy: 38% of first-time buyers said saving for a down payment was the most difficult part of their purchase. The typical first-time buyer was 35—the second-highest age on record, behind 2022’s 36.
Buyers most frequently funded their down payments with savings, but 19% of first-timers also reported using a gift from a relative or friend. The share of first-time buyers who used financial assets, such as stocks, bonds, retirement savings, or cryptocurrency, also increased, to 24% from 20% last year.
Write to Shaina Mishkin at [email protected]
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