First-time homebuyers ‘tiptoe back’ as median income tops $100k
NAR’s annual Profile of Home Buyers and Sellers found that down payments increased as more people saved up by living with friends or family before purchasing.
Key points:
- The median household income for homebuyers jumped $19,000 to $107,000, only the second time above $100,000 since 1981.
- There was an uptick in first-time buyers, although affordability challenges kept that number well below the historical average.
- Living with family or friends helped first-timers reach the highest down payment average since 1997.
With higher home prices and elevated mortgage rates shaping this year's real estate market, homebuyer income hit a rare and daunting milestone.
The median household income for buyers this year was $107,000, up $19,000 from a year ago, according to the National Association of Realtors, whose newly released Profile of Home Buyers and Sellers contains 142 pages worth of real estate trends from between July 2022 and June 2023.
This is just the second time that the median household income topped $100,000 since 1981, which is when NAR started doing this report, said Jessica Lautz, the association's deputy chief economist.
Despite the erosion of affordability, first-time homebuyers made up 32% of all homebuyers, up from 26% in the 2022 report — but still well below the 38% historical average.
"First-time buyers tiptoed back into the market this year with less competition and fewer multiple-offer scenarios," explained Lautz.
Getting 'buy' with a little help from their friends (and family)
Perhaps surprisingly, these first-time buyers were also able to put down a larger down payment. The typical down payment for this group was 8%, the highest since 1997. For repeat buyers, the down payment averaged 19%, the highest since 2005.
One reason for the increase, said Brandi Snowden, director of member and consumer survey research at NAR, is that more first-timers — nearly a quarter of those buyers — reported living with family or friends prior to their home purchase, and 10% were not paying rent.
And more first-time buyers had help funding their purchase: 23% received a gift or loan from a friend or family member, up slightly from 22% in 2022.
Snowden noted that being able to live with family and friends, particularly if they could do it rent-free, allowed them to save more for a down payment as well as pay debts and improve their credit score.
The uptick in first-time buyers also changed some broader demographics trends. The percentage of white homebuyers this year was 81%, down from 88% the year before. Black Americans saw a significant increase in market share, rising from 3% to 7% in one year.
"We typically see that minority buyers make up higher shares of first-time buyers," Snowden said.
How many people paid asking price, and more takeaways
Other highlights from the report:
The typical first-time buyer was 35 years old, down from last year's all-time high of 36.
70% of homebuyers didn't have children under 18, a record high for the survey.
A buyer's newly purchased home was a median 20 miles away from their previous residence, down from 50 miles last year but closer to the previous norm of 15 miles.
Most buyers paid the asking price, but 25% paid more.
The typical size for a home purchased was 1,860 square feet, with three bedrooms and two bathrooms.
Sellers typically lived in their home for 10 years before selling in 2023, which tracks with the average tenure in the past decade.