First-time buyers face yet another dream-killing reality in the hot housing market: they need to earn over $100,000 a year to buy a home.
The median household income needed to buy a home climbed from $88,000 to $107,000 last year, according to the National Association of Realtors’ 2023 Profile of Home Buyers and Sellers.
This is an annual increase of 22%, the largest on record. It’s also just the second time in NAR’s records that number has topped six figures.
In line with this, typical down payments have soared for both first-timers (8%) and repeat buyers (19%), the highest since 1997 and 2005, respectively.
Unsurprisingly, first-time buyers have taken a hit as affordability worsens, making up just 32% of all buyers. While this is an improvement from last year’s record low, it’s still below the average of 38% since 1981.
“In a still-competitive housing market, more well-off home buyers were able to have their bids accepted by offering larger down payments and even by paying cash,” said Jessica Lautz, NAR deputy chief economist and VP of research.
Around 80% financed their home purchase, up from 78% last year but still down from 87% two years ago.
The typical ages for first-time (35 years) and repeat (58 years) buyers fell slightly from the record highs of 36 years and 59 years in 2022, but it remains true that Americans are waiting to buy in more financially lucrative years.
“Notably, today’s first-time buyers had household incomes nearly $25,000 above last year and are more likely to use financial assets to enter the market,” Lautz noted.
More first-timers used the sale of stock or bonds (11%), 401k or pension (9%), IRA (2%), and the sale of cryptocurrency (2%) to secure down payments than in the past.
Buyers may find some relief moving forward.
In the last three weeks, rates have sunk from 8% to 7.4%, giving buyers breathing room after a succession of rate increases.
At the same time, though inventory remains low, it is on the rise. New listings were up 1.5% YOY at the beginning of November, only the second stock increase in more than a year.
Plus, with demand slowing as rates priced more buyers out of the market, the number of sellers cutting prices is on the rise, giving buyers the opportunity to negotiate for a better deal.
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