First-Time Home Buyers Hit Record Low With Prices Continuing to Climb

(TNND) — There have never been as few first-time buyers in the housing market, and the typical first-time buyer has never been as old as they are now.

Those are among the key findings in the National Association of Realtors’ “flagship report,” the annual Profile of Home Buyers and Sellers.

First-time buyers accounted for a record-low 24% of the market between July 2023 and June of this year, with housing affordability continuing to create significant barriers for those folks.

First-time buyers made up a third of the market five years ago.

The median age for first-time buyers also hit a record of 38, up from 35 last year and 33 five years ago.

At the same time, mortgage rates have shot up to between 6.5% and 7%. A 30-year fixed-rate mortgage cost about 3.7% during the same period five years ago.

“First-time buyers face high home prices, high mortgage interest rates and limited inventory, making them a decade older with significantly higher incomes than previous generations of buyers,” Jessica Lautz, NAR’s deputy chief economist and vice president of research, said in a news release.

Bankrate housing expert Jeff Ostrowski said the gap between the haves and the have-nots in the housing market has grown wider in the last several years.

Times are good for people with lower locked-in mortgage rates or growing equity in their homes.

But for a lot of people still stuck on the sidelines, homeownership has increasingly become out of reach, according to experts.

Home sales volume has been down around 4 million a year, which is sluggish compared to a typically healthy market pace of about 6 million home sales a year.

But the lack of supply is keeping upward pressure on home prices.

Ostrowski said he doesn’t see much relief coming down the pike for home buyers.

“Mortgage rates are looking less likely to come down significantly,” he said.

The Federal Reserve raised its benchmark interest rate 11 times between 2022 and 2023 as a lever to tame inflation.

Inflation has cooled enough to allow the Fed to start moving rates in the other direction, with cuts already in September and again this month.

But Ostrowski said mortgage rates don’t move in lockstep with the Fed’s benchmark interest rate the way some other consumer borrowing rates do, such as credit card rates.

Investors in mortgage-backed securities are also focused on the returns they can get from the safer 10-year Treasury, which could stay high with no sign the U.S. government is going to reduce its debt. That competition for investor dollars could keep upward pressure on mortgage rates.

Meanwhile, demand for housing could remain robust compared to the limited supply, with a big generation of millennials in search of a place of their own, Ostrowski said.

Home buyers overall, not just first-time buyers, hit an all-time high of 56-years-old, according to the new NAR report.

That’s up from 49-years-old last year.

And the typical home buyer’s median household income rose to $108,800 from $107,000 in the previous year.

First-time buyers had a median household income of $97,000, up from $95,900 the prior year and an increase of $26,000 in the last two years.

A record 26% of home buyers paid cash for their house, reinforcing the notion that people with wealth or equity are much better off in the current housing market.

And 17% of home buyers purchased a multigenerational home. Again, that’s a record in NAR’s tracking and reinforces the challenges of home affordability.