Are First-Time U.S. Homebuyers Poised For A Comeback?

Although the First-Time Buyer Market share Was 32%, it was the Third Lowest in Decades
Market Share Of First-Time Buyers Should Expand With Lower Mortgage Rates. Duh.
Cash Has Been A Noticeable Work-Around For Homebuyers, Just Not For First-Timers

It’s been a tough few years for would-be homebuyers to move from the rental market. As mortgage rates surged and monthly payments jumped, it recently got a lot tougher to become a homebuyer. But this is not just a recent occurrence. First-time buyer market share has been falling for several decades. If mortgage rates drop over the next year without much job loss, as market participants hope, combined with pent-up demand built up during the past couple of years of surging mortgage rates, could the declining trend begin to reverse? The market share of first-time buyers was 32% in 2023, the third-lowest share in 21 years.

In 2024, the National Association of Realtors (NAR) reported:

“First-time buyers made up 32 percent of all home buyers, an increase from 26 percent last year. Seventy-five percent of Younger Millennials and 54 percent of Gen Xers were first-time home buyers. Behind these groups, 44 percent of Older Millennials were also first-time home buyers.”

Monthly payments have been rising sharply for a decade, especially in the past two years. Mortgage payments actually dropped from 2007 through 2012 during the foreclosure crisis, temporarily pushing the market share even higher than in previous years. The ascent of monthly mortgage payments has been quite steep since the Fed rate pivot in early 2022.

Manhattan First-Time Buyers Trending Lower Too

Within our decade of data, the market share of Manhattan first-time buyers has been falling, especially since the Fed rate pivot in early 2022, somewhat in line with the national trend.

When looking at Manhattan’s median jumbo mortgage payment trend, the surge in cash buyers correlates well with the initial dip in payment due to the drop in interest rates in 2019 and then the surge in prices, followed by the jump in monthly mortgage payments coming out of the COVID crisis and Fed rate pivot in 2022.