Housing Market Becomes Elusive for First-Time Buyers

The housing market has become increasingly inaccessible to many would-be buyers, as high prices and mortgage rates continue to deter first-time homebuyers. According to a recent report from the National Association of Realtors, the share of homes sold to first-time buyers dropped to a record low in the last year. The report revealed that the percentage of first-time homebuyers fell to 26% in 2023, down from 34% in 2022. This decline is largely attributed to the rising cost of housing and the increasing difficulty of securing a mortgage. The median sales price of existing single-family homes reached $364,900 in 2023, up 6% from the previous year. Meanwhile, the average 30-year fixed mortgage rate rose to 7.1%, making it even more challenging for buyers to afford a home. The impact of this trend is being felt across the housing market. The number of first-time homebuyers has been declining steadily over the past few years, with the median age of first-time buyers increasing to 34 years old in 2023, up from 32 years old in 2022. This shift has significant implications for the housing market, as first-time buyers are often the driving force behind demand for new homes. The National Association of Realtors' deputy chief economist, Jessica Lautz, noted that the decline in first-time homebuyers is a concern for the industry. "We're not seeing young couples, unfortunately, so it didn't match," Lautz said, referring to the association's decision to scrap a photo of a young couple from the cover of their report. Instead, the association opted for a photo of a couple near retirement age. The decline in first-time homebuyers has also had a ripple effect on the broader economy. The housing market is a significant contributor to economic growth, and a decline in demand for new homes can have far-reaching consequences. The National Association of Realtors estimates that the decline in first-time homebuyers has resulted in a loss of over $100 billion in economic activity. The industry is bracing for further declines in the housing market, as interest rates are expected to remain high in the coming year. The Federal Reserve has indicated that it will continue to raise interest rates to combat inflation, which is likely to make it even more challenging for buyers to secure a mortgage. As a result, the National Association of Realtors is predicting a further decline in first-time homebuyers, with the percentage expected to fall to 24% in 2024. In conclusion, the housing market has become increasingly inaccessible to many would-be buyers, as high prices and mortgage rates continue to deter first-time homebuyers. The decline in first-time homebuyers has significant implications for the housing market and the broader economy, and industry experts are bracing for further declines in the coming year.