First-time homebuyers have returned to the housing market, and those who can afford a home are finding success. In fact, the share of buyers purchasing a home for the first time has rebounded to pre-pandemic levels, now representing 45% of all buyers.
That’s up from 37% of buyers surveyed last year, according to Zillow's 2022 Consumer Housing Trends Report. This may be attributed directly to declining home values and a cooling market, allowing new buyers to survey their housing options.
Zillow says the share of first-time buyers plummeted during the pandemic, as first-time shoppers lost out to older, repeat buyers who were able to tap the equity in their existing homes and use cash to make a stronger offer.
A Zillow survey done in June found younger buyers were more likely to report losing to an all-cash buyer at least once, as was the case for 45% of Gen Z and 38% of millennial buyers, compared to 30% of all buyers.
"First-time buyers now appear to be making relative gains as high mortgage interest rates disproportionately encourage current homeowners to stay put," said Manny Garcia, a Zillow population scientist. "The flow of homes into the market is slowing, suggesting homeowners are likely comparing their current low mortgage rate to today's rates and deciding not to move. While rising mortgage rates are hurting affordability for all buyers, first-time buyers may be less deterred by higher rates because they're comparing a monthly mortgage payment to what they're paying in rent."
Recent Zillow research from August found that those affordability challenges have driven up demand for the lowest-priced homes in each market. While there are fewer buyers overall, first-time buyers may find more competition for starter homes.
Not all hope for first-time homebuyers is lost. Today’s market rebalancing has the potential to especially benefit these buyers and grant them the flexibility to shop without trying to time the purchase of their new home with the sale of an existing home. Zillow noted that listings typically lingered 16 days on the market in August before going under contract, compared to eight days in June, meaning buyers have twice as much time to decide on a home compared to this time last year.
As new buyers begin to enter the market, Zillow compiled five tips to aid homebuyers:
- Understand what is affordable and use a mortgage calculator.
- Finance first and aim for a preapproval.
- Connect with an experienced agent.
- Take advantage of real estate technology.
- Keep the contingencies.
