The share of first-time homebuyers reached an all-time low in mid-2022, according to a report released yesterday by the National Association of Realtors (NAR).
- The share of first-time buyers reached a record low of 26% in the year ending June 2022, down from 34% in the prior 12-month period.
- The NAR credits low inventory, high housing prices, and rising interest rates for the drop in first-time homebuyers.
- The NAR's report also found that the share of White American buyers rose by six percentage points from the year prior, the share of Hispanic American buyers grew by one percentage point, and the shares of Black American and Asian American buyers both fell by six percentage points.
The Oldest and Smallest Share of First-Time Homebuyers
Back in July 2022, the NAR surveyed over 150,000 recent homebuyers who purchased a primary residence between July 2021 and June 2022. Of the 4,854 responses it received, the NAR found that just 26% of this representative sample were first-time homebuyers, a record low and down from 34% in 2021. Conversely, the age of the average first-time homebuyer reached an all-time high of 36 years, up from 33 years in the previous 12-month period. The typical repeat buyer's age rose to 59 years, also up three years from the year prior, and both ages are the highest in survey's history.
According to Jessica Lautz, NAR vice president of demographics and behavioral insights, the main contributing factors to the decline in first-time homebuyers is the combination of factors like low inventory and persistently high home prices. Skyrocketing mortgage interest rates also haven't helped, especially given the importance of finding a good mortgage lender. Additionally, buyers generally purchased homes for 100% of the asking price, with 28% purchasing for more than the asking price. As a result, first-time buyers have been forced to either save for down payments for longer periods of time or wait for a generational wealth transfer before they can enter the market, hence the age spike.
Additionally, potentially due to this lack of affordability, homebuyers were less likely in the last year to purchase a residence close to where they lived at the time. The median distance between a new home purchased by recent buyers and the one from which they moved was 50 miles, a record high and over a three-fold jump from the 15 mile median of 2018 through 2021.
Worsening Racial Homeownership Gap
The NAR's report also found that, at 88%, White Americans accounted for the majority of all buyers, up from 82% in 2021. The share of Hispanic American buyers also rose from the year prior, though only from 7% to 8%. Lautz posited that population growth among Hispanic Americans account for their increase, while White Americans are more likely to be repeat buyers that can leverage their existing housing equity. Black Americans and Asian Americans accounted for just 3% and 2% of buyers, respectively, a 6 percentage point decline for both groups from the previous 12-month period.
In a report released earlier this year, the NAR reported that the homeownership rate gap between White and Black households widened in 2020. The report found that Black homeowners face higher mortgage denial rates, reduced affordability due to lower household incomes, higher student loan debt, and less access to familial assistance than their White counterparts. Outside of the homebuyer's market, Black renters are also squeezed more than any other group, with one in two Black renter households spending over 30% of their income on rent.