Affordability concerns are locking more potential first-time homebuyers out of the housing market.
A new report showed that first-time homebuyers made up 24% of all buyers this year, marking the lowest share since 1981, according to data from the 2024 National Association of Realtors (NAR) profile of home buyers and sellers.
High home prices, elevated borrowing costs, and low inventory have hammered affordability over the past year, leaving many first-time buyers on the fence about purchasing a home. In July, the NAR surveyed over 167,000 recent homebuyers, who said the barriers to entry remained challenging.
“In the time frame surveyed, mortgage interest rates jumped to nearly 8%, and housing affordability reduced to historical lows. Home buyers continued to struggle with housing inventory,” NAR’s deputy chief economist Jessica Lautz told Yahoo Finance.
“At the same time, rental prices were rising and after a student debt pause, borrowers had to resume payments, making it difficult to save for a downpayment,” Lautz added.
Mortgage rates have jumped to between 6% to 7% this year — and now average mortgage rates are rising after hitting a two-year low in September. Meanwhile, entry-level buyers may also be bidding against those making all-cash offers.
“If a buyer was on solid financial footing to enter the buying market and there were multiple offers, there is a chance they were up against an all-cash offer,” Lautz said.