Unburdened by rate lock, the share of first-time homebuyers rose to 50 percent this year, according to a new report from Zillow. That’s the highest share since 2010.
No one can predict the future of real estate, but you can prepare. Find out what to prepare for and pick up the tools you’ll need at Virtual Inman Connect on Nov. 1-2, 2023. And don’t miss Inman Connect New York on Jan. 23-25, 2024, where AI, capital and more will be center stage. Bet big on the future and join us at Connect.
The share of first-time homebuyers rose to 50 percent this year as existing homeowners continued to show signs of rate lock, according to a new report released by Zillow on Wednesday.
This is the highest share since the U.S. gave first-time homebuyers an $8,000 tax credit in the wake of the Great Financial Crisis in 2010. That’s up from 45 percent in 2022 and 37 percent in 2021.
Despite affordability woes, first-time buyers saved, borrowed and were gifted money to overcome high home prices and interest rates, according to the report.
One explanation for the rise in first-time homebuyer share: First-timers don’t have the same rate lock-in effect that existing homeowners feel, Zillow said.
A Redfin estimate from this summer found that nearly 92 percent of homeowners had a mortgage rate that was less than 6 percent. More than 8 out of 10 borrowers have rates that are below 5 percent, Redfin said.
Rates rose past 7 percent last week, setting a new high-water mark for the year. That has caused a rate-lock effect that makes it much less likely for homeowners to sell, Zillow said.
“High mortgage rates and shortage of inventory is keeping would-be repeat buyers in their current homes,” said Zillow Senior Population Scientist Manny Garcia. “A greater relative share of first-time buyers is filling the gap, and they’re competing against each other for the limited number of affordable starter homes on the market.”
Nearly half of all first-time buyers used money lent or gifted from family and friends to help finance their purchases. Forty-five percent of conventional buyers bought points to bring their rates down and lower their monthly payments, Zillow said. That’s up from 30 percent in 2021.
First-time buyers are more likely to get in touch with at least three real estate agents and three mortgage lenders, Zillow said.
Millennials, who are people between the ages of 29 and 43, make up just under half of first-time homebuyers. Gen Z adults, aged 18 to 28, make up 27 percent of first-time buyers, Zillow said.