According to Zillow’s 2023 Consumer Housing Trends Report, first-time buyers now make up 50% of all homebuyers, up from 45% last year and a meaningful jump from 37% in 2021. This is the highest share that Zillow has ever recorded, and the share of first-time buyers likely hasn’t been this high since around 2010, when there was a first-time homebuyer tax credit.
First-time buyers are making gains relative to repeat buyers. Zillow research finds a vast majority of homeowners with mortgages have locked in a rate below 5% and are almost half as likely to consider moving.
It’s true that first-time buyers make up a larger piece of a smaller pie, as home sales and inventory shrink. However, this significant rise in the share of first-time buyers helps explain what’s driving demand and keeping upward pressure on prices in a market with mortgage rates surpassing 7%.
Affordability is the greatest hurdle for first-time homebuyers. It now takes nearly 12 years for a typical first-time buyer to save up for a down payment, compared to nine years prior to the pandemic. Meanwhile the typical monthly home payment has more than doubled in that time. Yet the growing share of first-time buyers suggests many are getting creative to make homeownership a reality.
Zillow’s report finds that 60% of first-time buyers are tapping at least two sources to finance their down payment, most commonly their savings and gifts from family or friends. In addition, a growing share of buyers are paying an upfront fee to reduce the interest rate on their mortgage and in turn, lower their monthly payment. Zillow research finds nearly 45% of conventional primary home borrowers bought points to ease monthly costs, compared to 30% who did the same in 2021.
Nearly half of first-time home buyers are millennials (49%), a massive generation of adults ages 29 to 43 who are fueling fundamental housing demand as they hit their prime homebuying years. Gen Z adults between 18 and 28 years old are hot on their heels, making up more than one-quarter of all first-time buyers (27%).
These younger buyers are debunking the “lazy millennial” myth by working harder during the homebuying process. Zillow’s report finds that first-time buyers are more likely to contact at least three real estate agents and three mortgage lenders, compared to repeat buyers. They’re also more likely to make at least two offers on homes and are more likely to report being denied a mortgage at least once before they’re approved for a loan.
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