MORTGAGE
Homebuying Trends — First-Time Homebuyers
EXPECTED READ TIME: 4 MINUTES
July 9, 2021
As first-time homebuyers enter the market, new trends start to emerge. Even with the pandemic of 2020 and 2021, the housing market is still strong. And although unemployment increased, many borrowers in higher-paid positions kept their jobs and bought their first home. Read on to learn more about these buyers, what's important to them, the type of homes they're buying, and where they're moving to.
Demographics of First-Time Homebuyers
Not surprisingly, millennials (23 to 40-year-olds in 2021) now make up the most significant portion of new homebuyers. Information from the National Association of Realtors in 2020, state they composed 38% of the homebuyers. That's up from 37% in 2019. The next largest group of homebuyers are the 40 to 54 age bracket.
Overall, across all ages, the biggest reason people bought was that they wanted a place of their own. So, let's look at millennial home buying trends and why they're buying. One of the most important things for first-time homebuyers — many who are millennials is convenience.
When shopping for a house, they wanted to be close to shopping, entertainment, outdoor recreation, and work. One of the significant changes across many industries, especially high-tech, is that many employees could now work remotely. That change was good for employers because they saved money. And remote working gave the employee more time since they didn't have to commute.
Instead of living near the office, remote workers now had more choices of where they could live. Even those that went into the office once a week could move out of the city to the suburbs. Living and working from home, especially with kids, can be challenging — especially in smaller spaces. That was a motivating factor for many to purchase their first home sooner than they had initially planned.
First-Time Homebuyer Percentages
Just about 1/3 of all homebuyers are first-time buyers. That's a consistent percentage in 2019 and 2020. According to the National Association of Realtors (NAR) Annual Generational Report:
- 29 and younger: 88% of those were first-time homebuyers
- 30 to 39 years old: 52% of those were first-time homebuyers
- 40 to 54 years old: 23% of those were first-time homebuyers
Let's see what the top three reasons to buy a home were for different age groups.
Homebuyers: 28 and younger
- Wanted a home of their own (main reason among all ages)
- Had a change in a family situation (having kids or getting divorced)
- Wanted a larger home (working and living at home became cramped)
Homebuyers: 29 to 38 years old
- Wanted a home of their own (main reason among all ages)
- Wanted a larger home (growing families needed more space)
- Job-related relocation or move (new job or now could work remote)
Homebuyers: 39 to 53 years old
- Wanted a home of their own (main reason among all ages)
- Job-related relocation or move (new job or now could work remote)
- Wanted a larger home (growing family and making more money were typical)
Number of Homes Sold to First-Time Homebuyers
Let's look at the last five years to see how many first-time buyers bought homes. Here are the numbers:
- 2015: 1.83M
- 2016: 2.07M
- 2017: 2.11M
- 2018: 2.03M
- 2019: 2.19M
- 2020: 2.76M
These sales numbers are interesting especially considering the pandemic in 2020. Although the inventory was low, buyers were still buying. One cause of the low inventory is that the majority of homes sold are by older homeowners. During the pandemic, they became less likely to list their home, show it, sell, and move. That should loosen up in 2021.
But the good news is that the real estate market was resilient in 2020. One reason is with online platforms like Zillow, Redfin, Realtor.com, and Trulia — buyers could view homes coming on the market and ones they may be interested in.
Where are first-time homebuyers moving to?
Many first-time homebuyers move from high-cost big cities like NYC and San Jose to more affordable big cities.
The top ten states where millennials are moving to are:
- Texas
- Colorado
- Washington
- Arizona
- Florida
- North Carolina
- Ohio
- Tennessee
- Idaho
- Pennsylvania
And some of these states have large high-tech employers in cities like Denver, Seattle, Phoenix, and Austin.
Here are the locations preferred:
- Suburbs and subdivisions: The choice for 51%+ of all buyers
- Small towns: 18% - 25% of buyers choose this
- Urban and city: Only 14% of buyers choose the big city
- Rural: Only 10% to 13% were willing to be that remote
What type of homes are first-time homebuyers purchasing?
According to the NAR 2020 Generational Trends report, here are some of the common things this buying group chose:
- A detached single-family home was still the top choice as it has been for years.
- The townhome was the second choice. And condos after that.
- Move-in ready, generally didn't want to have to do renovations or repairs.
- Most buyers purchased homes within 10 to 12 miles of where they were living.
- The average square footage ran from 1,600 to 1,900.
Median home prices were $206,300 for younger buyers (22 to 29). Buyers in the 30 to 39 age brackets spent more. The median price was $282,000. Then, of course, there were those millionaire buyers that purchased their high-end dream home, but those weren't the norm.
Isn't it interesting seeing how much in common older generations have with younger first-time homebuyers? All current homeowners were first-time buyers in that past. The majority wanted a three-bedroom and two-bath home of their own in the suburbs or a small town. Although some things change — many things stay the same.