After more than doubling over the last decade, the share of newly built homes being purchased by first-time home buyers (FTHB) has declined slightly in 2024, as overall purchase applications continue to lag.
The most recent Housing Market Index (HMI) from the National Association of Home Builders (NAHB) and Wells Fargo indicated that an average of 40% of builders’ single-family home sales this year have been to FTHBs – down from 42% in 2023 and 43% in 2022 and 2021. The share of FTHBs sweeping up new home sales grew from 19% in 2016 to 43% by 2021, before beginning the recent decline.
Rose Quint, assistant vice president for survey research at NAHB, shared her granular analysis of the data, finding a direct correlation between FTHB share and builder size.
“To be more precise,” Quint wrote, “builders with one to five single-family starts per year reported that only about 18% of their sales so far in 2024 have gone to first-time buyers. That average increases to 21% among builders with six to 24 starts, to 34% among those with 25 to 99 starts, and reaches 44% among builders who start at least 100 homes a year.”
Market activity is beginning to show signs of picking up, with mortgage rates down roughly 100 basis points since the spring. Affordability hit a six-month high in August, aiding families and individuals buying their first home. Meanwhile, pending sales of starter homes rose by 10.2% year over year in July, reaching the highest level since October 2022, according to Redfin.
“The overall market remains sluggish, but we are beginning to see first-time homebuyers come off the sidelines, buoyed by falling mortgage rates and an increased number of homes hitting the market,” Redfin Senior Economist Sheharyar Bokhari said this August.
Mortgage applications for new home purchases increased 4.4% year over year in August, the Mortgage Bankers Association (MBA) reported. Encouragingly, Fannie Mae’s Economic & Strategic Research (ESR) Group forecasts new home sales to grow as mortgage rates continue to fall and current inventories are sold off.
“While we have softened our new home construction forecast over the past couple months,” the Group said, “we continue to expect comparatively robust activity in the new home sales market as elevated existing home prices will continue to make new homes attractive, especially as homebuilders continue to offer concessions and rate buy downs.”
Builder confidence in the market for newly built, single-family homes rose in September, following four consecutive monthly declines. The Federal Reserve's 50-basis-point rate cut last week buoyed the outlook for builders further, with the prospect of easing construction costs likely to support new construction growth in 2025.
