A resurgence of first-time buyers, and a look at agent pay 

The real estate market has become increasingly unaffordable in recent years, so it may come as a surprise that more first-time buyers have managed to achieve homeownership.

First-time homebuyers made up nearly a third (32%) of all buyers between July 2022 and June 2023, according to the newly released Generational Trends Report from the National Association of Realtors. That's up from 26% in last year's report.

And it wasn't just the youngest buyers making their first home purchase. While most buyers in the younger millennials category (75%) were first-timers, a majority of Gen X buyers (54%) were also doing so for the first time.

The reason more first-time buyers were able to land a home? Less competition, said Jessica Lautz, deputy chief economist at NAR.

"The time period surveyed is when there was a rapid rise in mortgage interest rates," Lautz said. "Many buyers retreated from the market, which allowed some first-time buyers with higher incomes to compete following a time period of intense competition."

What agents need to know about millennials

Millennials make up the largest group of homebuyers at 38% of the overall share, followed by Gen X (24%). That's important to note, because millennials are taking different paths to homeownership than previous generations. Compared to older generations, they are more likely to find the home they want on the internet using a mobile device — but also more likely to use an agent to complete the process.

What they needed most from their agent, the report found, was help understanding the homebuying process. They also looked to their agent to point out unnoticed features or faults, which millennials ranked as a significantly higher priority compared to other generations. Negotiating a better sales contract was also a higher priority.

When choosing an agent, millennials tended to rank honesty and trustworthiness higher than older generations, who were more interested in experience and reputation. They also prefer texting over other forms of communication, although many still rank telephone calls and emails highly.

Compensation and buyer agreements

The report also delved into how buyers compensated their agents, something that's been highly scrutinized in light of the class action lawsuits targeting agent commission practices. According to the survey, 52% of buyers reported that agent commissions were paid entirely by the seller, a level that was fairly consistent across generations, while 25% stated commissions were paid entirely by the buyer.

Younger buyers were least likely to know how agents were paid. According to the report, 27% of homebuyers aged 25-33 didn't know whether their agent received a percentage of the sales price or a flat fee; among all buyers surveyed, that figure was 19%. And 11% of buyers simply didn't know how their agent was compensated at all.

The majority of buyers surveyed said they had some form of buyer representative arrangement, with 41% indicating it was a written arrangement and 17% stating they had a verbal arrangement. But a significant share — 16% — didn't know whether they had any such arrangement, and that percentage was highest for younger millennials at 24%. The oldest buyers were least likely to have something in writing. 

Since the survey was completed prior to the Sitzer/Burnett verdict and NAR's Mar. 15 settlement, which mandates buyer agreements, that trend is expected to change.

How are home sellers paying agents — and do they negotiate fees?

Most sellers (75%) said they paid for all agent compensation, and in almost all cases (92%), payment was a percentage of the sale price. Just 4% of sellers said they paid a flat fee. 

But there were some notable generational differences: 62% of the youngest sellers reported paying all compensation, while 8% weren't sure how the agents in the transaction were compensated, and 16% indicated that the seller and buyer both contributed to commissions. Among the oldest sellers, 86% reported paying the whole commission. 

Across all generations, 12% of sellers said both they and the buyer paid compensation, and 7% said it was paid by the buyer only. 

Another hot topic in the wake of the commissions lawsuits has been negotiation. NAR and others have emphasized that commissions have always been negotiable — but do sellers know that? 

According to the report, 15% of sellers (across all generations) did not know commissions were negotiable, and that number was significantly higher for millennials: 24% of older millennials and 21% of younger millennials were unaware they could negotiate.

But other sellers — 19% of them — asked about fees and were successful in negotiating them. The oldest sellers, who were likely more experienced, were most successful in getting a lower fee, with about a quarter of sellers over age 69 reporting a negotiated fee. A few struck out: 5% of sellers attempted to negotiate commissions but indicated their agent was unwilling to do so.