Despite the highest home prices ever, fierce competition, and a nationwide housing shortage, more first-time buyers become homeowners during the COVID-19 pandemic.
The percentage of first-time buyers who successfully purchased properties rose to 34% of all buyers over the past year. That’s up from 31% last year, according to the National Association of Realtors® 2021 Profile of Home Buyers and Sellers. This is the 40th year the report has been conducted.
The report is based on an NAR survey of nearly 5,800 buyers who purchased homes between July 2020 and June 2021.
“We have seen more first-time buyers taking advantage of the ability to live at home with family members during the pandemic and move directly into homeownership,” says Jessica Lautz, NAR’s vice president of research.
“That’s given first-time homebuyers a leg up. They’ve been able to save for a down payment without paying rent and be able to pay down debt,” says Lautz.
The typical first-time buyer was 33 and had a median household income of $86,500 in 2020.
First-time buyers were helped by record-low mortgage interest rates, which dipped below 3% earlier this year. The lower rates helped to offset higher home prices.
Plus, there were simply more millennials who aged into typical homebuying years, which helped add to the share of first-time buyers in the market.
“The ability to work remotely or work half of the time in the office and half of the time at home allowed homebuyers some flexibility to look outside of expensive areas” as well, says Lautz. If buyers didn’t have to commute every day, many were willing to move farther outside of the bigger cities.
Certainly, first-time homebuying hasn’t been easy over the past year. Coming up with that down payment was the hardest part of the homebuying process for about 29% of first-time buyers. Most had to make sacrifices to afford their home, such as spending less on entertainment, luxury goods, and clothes.
“It’s especially difficult because they’re facing multiple bids from other buyers who may be able to put down all cash or a large down payment,” says Lautz.
What to know about today’s homebuyers
Overall, today’s successful buyers mostly had dual incomes and were doing well financially. Their median age was 45, and they had household incomes of roughly $102,000 in 2020.
More than two-thirds of recent buyers were coupled off. Roughly 60% were married, and 9% were unmarried couples. Nearly a fifth, 19%, were single women, and 9% were single men. A growing number of first-timers were unmarried couples.
“Two incomes make it easier to compete in a multiple-bid situation,” says Lautz.
People of color made up a small percentage of the buyer pool: 6% were Black, another 6% were Asian, and 7% were Hispanic. About 6% identified as gay, lesbian, or bisexual. Less than 1% identified as transgender.
Location remained very important to buyers, with the quality of their new neighborhoods becoming the top concern. That was followed by being close to family and friends.
“People are very much driven by what’s important to them, and what’s important to them is their family,” says Lautz. “The pandemic has underscored that.”
About 87% of buyers used a mortgage to finance their purchase, with the typical down payment being 13%. First-time buyers put down about 7%, while repeat buyers kicked in 17%.
What to know about home sellers
Home sellers had an easier time unloading their properties in today’s housing market, marked by a dearth of properties for sale.
They were able to rake in a median $85,000 profit on their properties this year as bidding wars and offers over asking price became fairly standard in many parts of the country. This drove profits up considerably from $66,000 last year.
Homes also sold at a rapid pace. They were on the market for a median of just one week—compared with three weeks last year.
“Sellers are receiving their entire asking price, and many receive more,” says Lautz. “This is the lowest time on market, and this is the highest sales price in comparison to the asking price we’ve recorded.”
Today’s sellers were a median 56 years old and had median household incomes of about $112,300.
All of the sellers surveyed in the report were also buyers. The pandemic led many folks to seek out larger homes where they would have space for home offices, personal gyms, and areas for their children to attend virtual school. Other sellers wanted to move to other parts of the country, and some wanted to downsize.
Nearly half of repeat buyers, 46%, purchased larger homes; about a quarter, 28%, bough similarly sized properties.
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