Attention First-Time Homebuyers: Your Deadline is Looming!
The real estate landscape is evolving, and according to Zillow’s freshly released 2023 Consumer Housing Trends Report, first-time homebuyers are leading the charge like never before. A staggering 50% of all homebuyers this year are taking their first step onto the property ladder, marking a significant increase from 45% just last year, and a far cry from the 37% recorded in 2021. In fact, the last time the market saw such an influx of first-time buyers was around 2010, a year significantly influenced by a first-time homebuyer tax credit.
So, why this surge in newbies? The “lock-in” effect is a huge driver. Many of these first-time buyers are seizing the moment by locking in sub-5% mortgage rates—rates they’re unlikely to let go of, especially with current mortgage rates soaring close to 7%. This is all unfolding against a backdrop of shrinking inventory, making the rise in first-time homebuyer activity a key puzzle piece in understanding today’s market demand.
Manny Garcia, Zillow’s senior population scientist, sheds more light on the trend: “High mortgage rates and dwindling supply are making it difficult for repeat buyers to upgrade or downsize. First-time buyers are stepping in to fill that void, facing fierce competition among themselves for the scarce affordable starter homes available.”
Affordability, of course, remains the greatest obstacle for first-time homebuyers. Data from Zillow indicates that it now takes approximately 12 years for an average first-time buyer to accumulate a standard 20% down payment—up from a nine-year saving span pre-pandemic. To navigate this challenge, a majority are pooling resources from multiple income streams. Whether it’s juggling multiple jobs or partners combining finances, new buyers are getting creative to meet their down payment goals. Down payment assistance programs are also becoming increasingly popular aids.
Age demographics add another layer to the narrative. Millennials, a cohort ranging from ages 29 to 43, constitute nearly half (49%) of all first-time homebuyers. Hot on their trail are Gen Zers, between the ages of 18 and 28, who make up a significant 27%.
Zillow’s report debunks the tired trope of the “lazy millennial.” In fact, it reveals that younger buyers are putting in extra effort in their quest for homeownership. They’re more likely to consult at least three real estate agents and a similar number of mortgage lenders. These go-getters are also making multiple offers and facing at least one mortgage denial before finally getting approved. It’s clear that their dedication is reaping rewards, cementing their stake in the American Dream despite today’s challenging entry costs.
In summary, first-time homebuyers are reshaping the real estate market in 2023, buoyed by attractive mortgage rates and a willingness to adapt and compete. While affordability remains a hurdle, their resilience and innovation are propelling them forward, proving that where there’s a will, there’s a way.