A national annual survey showed rising home prices made it difficult for first-time homebuyers to purchase a home between July 2021 and June 2022.
First-time home buyers made up 26 percent of buyers, down from 34 percent in the previous reporting period. It was the lowest share of first-time buyers since the National Association of Realtors (NAR) began collecting data in 1981.
The NAR mailed a 129-question survey "using a random sample weighted to be representative of sales on a geographic basis to 153,045 recent home buyers." NAR received nearly 5,000 responses for its 2022 "Profile of Home Buyers and Sellers." The italicized text below was not part of the survey responses.
Characteristics of Home Buyers
- The average age of a first-time homebuyer was 36 years old, rising from 33 in the previous reporting period. The typical repeat buyer age climbed to 59 years. Both average ages are at all-time highs. Younger first-time home buyers, on average, have lower incomes and less money for down payments than older, move-up home buyers. Until recent months, first-time homebuyers faced a difficult Greater Boston real estate market, and affordability remains an issue.
- Married couples made up 61 percent of homebuyers. In comparison, 17 percent were single females, 9 percent were single males, and 10 percent were unmarried couples. The number of unmarried homebuyers was the highest recorded in the survey.
- Fourteen percent of home buyers purchased a multigenerational home to care for aging parents, to accommodate adult children, and for cost savings.
- White/Caucasian home buyers made up 88 percent of buyers. Eight percent were Hispanic/Latino, 3 percent were Black/African-American, 2 percent were Asian/Pacific Islander, and 3 percent identified as other. The share of White/Caucasian buyers and Hispanic/Latino buyers both grew. In contrast, the percentage of other racial and ethnic groups declined.
- Ninety-one percent of home buyers identified as heterosexual, 2 percent as gay or lesbian, 2 percent as bisexual, and 5 percent preferred not to answer.
- Veterans made up 22 percent of home buyers, and 1 percent were active-duty service members.
- At 22 percent, the primary reason for purchasing a home was the desire to own their own home. For first-time home buyers, this number jumped to 62 percent.
Characteristics of Homes Purchased
- Most homebuyers purchased an existing home (88 percent), and 12 percent of buyers purchased new construction.
- Many homebuyers purchasing new construction homes were looking to avoid renovations and problems with plumbing or electricity (41 percent). Thirty-one percent of buyers who bought previously-owned homes were most often considering a better price.
- Detached single-family homes continued to be the most common home type for homebuyers at 79 percent, followed by mobile or manufactured houses at 8 percent.
- Senior-related housing held steady at 7 percent (for buyers 60 years or older), with 17 percent of homebuyers typically purchasing condominiums and 8 percent purchasing a townhouse or row house.
- The median distance between the home purchased and the one moved from was 50 miles, amounting to a significant increase in miles moved. Between 2018 and 2021, the median distance was 15 miles.
- For buyers, 49 percent cited the quality of the neighborhood as the most critical factor determining the location. Convenience to friends and family and overall affordability of homes were both noted at 37 percent.
- Nationally, homebuyers typically purchased their homes for 100 percent of the asking price, with 28 percent purchasing for more than the asking price. In Massachusetts, homebuyers paid well above 100 percent of the listing price (106 percent in June 2021), and significantly more than 28 percent of homebuyers paid more than the asking price.
- The typical home purchased was 1,800 square feet, had three bedrooms and two bathrooms, and was built in 1986.
- Overall, homebuyers expected to live in their homes for a median of 15 years, while 28 percent said that they were never moving. Given the low mortgage interest rates during the reporting period, many homebuyers will likely stay put for many years.
The Home Search Process
- For 47 percent of homebuyers, looking online for properties for sale was their first step in the home-buying process. Eighteen percent of buyers first contacted a real estate agent. It is a mistake not to start the home-buying process by interviewing at least two real estate professionals, including an exclusive buyer agent.
- At 96 percent, nearly all homebuyers used online tools in the search process.
- Ninety-one percent of homebuyers were at least somewhat satisfied with the home-buying process.
Home Buying and Real Estate Professionals
- At 86 percent, homebuyers purchased their home through a real estate agent or broker, and 10 percent purchased directly through the previous owner. Without professional, loyal representation, homebuyers are susceptible to making costly mistakes.
- Having an agent to help them find the right home was what buyers wanted most when choosing an agent (49 percent).
- Sixty-seven percent of buyers interviewed only one real estate agent during their home search. Such a big financial commitment requires greater due diligence from homebuyers.
- At 89 percent, homebuyers would use their agent again or recommend their agent to others.
Financing the Home Purchase
- Seventy-eight percent of homebuyers financed their home purchase, down from 87 percent during the previous reporting period.
- The typical downpayment for first-time homebuyers was 6 percent, while the average downpayment for repeat buyers was 17 percent.
- For 47 percent of homebuyers, the source of the downpayment came from their savings. Thirty-eight percent of repeat buyers cited using the proceeds from the sale of a primary residence. Twenty-two percent of first-time buyers used a gift or loan from friends or family for the downpayment.
- For first-time homebuyers, 26 percent said saving for a downpayment was the most challenging step in the process.
- The majority of first-time buyers did make financial sacrifices to purchase a home. For those who did, the most common sacrifices buyers reported were cutting spending on luxury goods, entertainment, and clothes.
- Homebuyers continue to see purchasing a home as a good financial investment. Eighty-eight percent reported they view a home purchase as a good investment. Real estate markets fluctuate, but real estate has increased over more extended periods.
With the cooling real estate market, first-time homebuyers will face less home competition. On the other hand, scarce inventory and higher interest rates make homes unaffordable for many prospective home-buying consumers.