The Age of First-Time Home Buyers Is Going Up. Here's Why.

This content was originally shared by the National Association of REALTORS® (NAR) and written by Jessica Lautz, Deputy Chief Economist and Vice President of Research at the NAR. Find the original article here.

It was never the avocado toast and cappuccino. The entrenched joke of millennials not buying homes in favor of overpriced coffee is an entrenched myth. It is important to break down what is really going on, what the numbers are, and what the measures mean.

What We Know: U.S. Population by Age & Median Home-Buyer Age

• Millennials are the largest generation of Americans.
• The red line, representing the age of 36, is the median age of today's first-time home buyers.
• This is the oldest first-time home buyer age since NAR first started collecting this data in 1981.
• Traditionally, the first-time home buyer was between the ages of 28 and 33.
• The second red line, representing the age of 59, is the median age of repeat buyers.

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‍Reasons for Decreasing First-Time Home Buyer Share

• Although the first-time home buyer age jumped, the share of first-time buyers continues to lag at historic lows.
• The annual share is at 26%.
• The historical average was at 40% of all primary residence buyers dating to 1981.
• Low housing inventory, which has averaged nearly 1 million units in the market is a factor.
• Higher interest rates are pricing consumers out.
• In many areas of the U.S., home prices are rising.
• In areas where home prices have softened, multiple bids pushed up prices throughout the pandemic.

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Prior Living Arrangements & Barriers to Homeownership

• Among those who indicated saving for a down payment was difficult, these were the biggest factors: 
  • High rent (40%)
  • Car loan (39%)
  • Credit card debt (38%)
  • Student loans (35%)
    • This makes the top four debts at a time when student loan payments were paused for many.
    • Debt holders may have been hesitant to take out a mortgage knowing that payments could resume.
  • Child care costs (19%)
    • Overall, the cost has increased 22% since 1990, costing $833 per month on average for one child in 2021.
• The recent softening in high rental prices will be a welcome relief moving forward.
• The highest share of first-time home buyers (27%) skipped rent and moved directly from a family member's home into homeownership.

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Census Homeownership Rate Data

• Looking at the Census homeownership rate data from 2021 to 2022, the homeownership rate for those under 35 did improve.
• Comparing the homeownership rate from 1982 to today and separating the data by generation, the outlook is less positive.
• For baby boomers and Gen Xers, the average homeownership rate for those under 35 was 39.7%. There has yet to be a year that millennials have reached that number.

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Share of Home Buyers in Each Generation: 2013-2023

• Even though millennials are the largest adult generation in the U.S., they had a shrinking share of buyers in the market last year.
• The largest number of millennials is at an age they traditionally have entered the market or at least had household formation.
• This year, baby boomers overtook millennials.
• The older generation's ability to pay all cash for a home purchase is a big factor.
• Boomers are the likely winner if there is a bidding war on a home, as 51% of boomers and 32% of younger boomers paid all cash for their most recent purchase.