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The housing market is rough right now all around, but it’s particularly difficult for first-time homebuyers, who are being pushed out by high prices, rising mortgage rates and low inventory. The National Association of Realtors’ newly released 2022 Profile of Home Buyers and Sellers confirmed this, revealing a significant decrease in the number of first-time buyers and an increase in their age. Read on for more insights revealed by the report data, based on a survey of homebuyers nationwide.
Housing market rough for first-time buyers
Today’s challenging real estate climate has kept many first-time homebuyers away. In fact, their share of the market was only 26 percent — the lowest since 1981, when NAR first started collecting this data. For comparison’s sake, first-time buyers had a 34 percent share last year and 50 percent back in 2010. Not only did 2022 see fewer first-time buyers, but the ones it did see were older than ever, with their typical age being an all-time high of 36. That’s up from 33 in 2021.
Jessica Lautz, NAR vice president of demographics and behavioral insights, isn’t surprised by the drop in first-time buyers, given the market’s rising rates and persistently low inventory. “First-time buyers are older as a result of saving for down payments for longer periods of time or relying on a generational transfer of wealth to propel them into homeownership,” she said in a press release. “Those who have housing equity hold the cards, and they’ve fared very well in the current market.”
More than a quarter of first-time buyers reported that saving for a down payment was the most difficult part of their home-buying journey; most sacrificed on luxury goods, entertainment and clothing purchases to build up more savings. The typical down payment for a first-timer was 6 percent, compared with 17 percent for repeat buyers, and 22 percent used a gift or loan to help pay it.
Types of homes purchased
Traditional single-family homes continue to be the most popular option for 2022 buyers, with 79 percent of sales being detached single-family structures. Of all buyers surveyed, 88 percent purchased an existing, previously owned home, while 12 percent purchased new construction. The typical home purchased was about 1,800 square feet, with three bedrooms and two bathrooms, and built in 1986.
Location-wise, neighborhood was the top factor considered, with 49 percent of buyers citing the quality of the neighborhood above all else. Affordability and proximity to friends and family were also important, both coming in at 37 percent.
Buyers bought more homes in small towns and rural areas this year, moving a median distance of 50 miles from their previous homes. That’s a huge increase from a median of just 15 miles between 2018 and 2021. The share of buyers purchasing homes in small towns was 29 percent, and in rural areas 19 percent, both record highs. Meanwhile, the share purchasing in the suburbs (39 percent) and urban areas (10 percent) both declined since last year.
“For many, remote work decisions were formalized in the last year, providing clarity for employees to permanently move to more distant areas,” Lautz said. “For others, housing affordability was a driving factor to seek homes in areas farther away.”
Finding and financing homes
Finding a home has been taking longer in 2022, with buyers spending a median of 10 weeks on their search — two weeks longer than in 2020 and 2021. And they typically purchased the home at full asking price, with 28 percent paying above ask.
Looking online is by far the most popular method of searching for a home, with 96 percent of buyers saying they used online tools at some point in the process. 86 percent ultimately bought using a real estate agent or broker, while only 10 percent bought directly from the previous owner.
When it came to money, fewer recent buyers financed their purchase this year, at 78 percent, than last year, which saw 87 percent buyer financing. The source of down payment funds was savings for 47 percent of buyers, while 38 percent of repeat buyers used proceeds from the sale of their previous residence. Despite all the financial challenges, 88 percent of buyers overall said they saw purchasing a home as a good financial investment.
Home seller stats
Homes sold in 2022 went fast, and for full price: The median sale price was 100 percent of list price, with a median time frame of just two weeks on the market. Here are some insights into sellers, who clearly held the upper hand in the housing market this year:
- The typical seller in 2022 was 60 years old, versus 56 one year ago.
- They typically lived in their homes for 10 years prior to selling, up from eight years in 2021.
- 86 percent worked with a real estate agent, 10 percent sold on their own via FSBO (For Sale by Owner) and only 1 percent sold to an iBuyer.
- 20 percent of sellers offered incentives to buyers, down from 26 percent last year.
- When they went on to purchase another home, becoming repeat buyers, they generally had an easier time. Thanks to their wealth from the increased equity of their real estate, a larger share of this group was able to pay all cash.
The dream of homeownership has been more difficult to realize lately, with high prices, rising mortgage rates and low inventory all creating roadblocks. That may change as overheated real estate conditions cool off, but for most of 2022, the housing market was difficult, especially for hopeful first-time buyers.