First-Time Homebuyers in the US Real Estate Market (2020-2024)
2/24/2025
This report examines the trends in first-time homeownership in the US real estate market over the past five years, from 2020 to 2024. It analyzes the percentage of first-time homebuyers, factors contributing to these trends, and provides insights into the future of this market segment.
Percentage of First-Time Homebuyers in the US (2020-2024)
Available data reveals a fluctuating trend in the percentage of first-time homebuyers in the US real estate market. In 2020, first-time homebuyers represented 31% of all homebuyers. This was followed by a significant increase to 37% in 2021, with half of all home buyers making their first purchase. The median age of first-time homebuyers in 2021 was 33, with a median income of $90,0003. However, this upward trend reversed in 2022, with the percentage dropping to 26% before rebounding to 32% in 20234. The most recent data from 2024 indicates a significant drop to a historic low of 24%. These shifts suggest a dynamic market influenced by various economic and social forces.
| Year | First-Time Homebuyer Percentage |
|---|---|
| 2020 | 31% |
| 2021 | 37% |
| 2022 | 26% |
| 2023 | 32% |
| 2024 | 24% |
First-Time Homebuyers in the New Jersey Real Estate Market (2020-2024)
Data specific to the New Jersey real estate market is limited. In 2020, New Jersey had a higher proportion of first-time homebuyers (38%) compared to the national average (31%). This difference could be attributed to various factors, including state-specific policies, economic conditions, or demographic trends. For instance, New Jersey has programs like the "First-Time Homebuyer Mortgage Program" that might incentivize homeownership. However, without data for subsequent years, it is impossible to ascertain a clear trend for New Jersey. This lack of data presents a challenge for analyzing the long-term dynamics of the first-time homebuyer market in New Jersey and understanding how it compares to national trends. Further research and data collection are needed to provide a more comprehensive picture of this market segment in New Jersey.
Trends in First-Time Homeownership (2020-2024)
Several interconnected factors have contributed to the trends observed in first-time homeownership over the past five years:
- Economic Conditions: Fluctuations in interest rates, inflation, and economic growth significantly impact affordability and influence the decision to purchase a home. For example, in 2024, first-time buyer incomes reached an all-time high of $97,000, yet the percentage of first-time buyers decreased. This suggests that despite increased earning potential, other economic factors, such as rising home prices and interest rates, might be creating barriers to entry for first-time buyers.
- Housing Market Dynamics: Inventory levels, home prices, and competition among buyers play a crucial role in determining the accessibility of homes for first-time buyers. The surge in first-time homebuyers observed in 2021 likely increased competition and potentially contributed to the subsequent decline in affordability.
- Demographic Shifts: The age and income levels of potential homebuyers, as well as changing family structures and lifestyle preferences, influence the demand for first-time homeownership. The median age of first-time homebuyers has been increasing, indicating a potential delay in entering the housing market6. This could be due to factors like student loan debt, career changes, or evolving priorities among younger generations.
- Social and Cultural Factors: Attitudes towards homeownership, the desire for stability, and the perceived value of owning a home also contribute to the trends7. In 2024, a record high 26% of buyers paid cash for their homes. This trend could reflect a desire for financial security and a shift in investment strategies, potentially making it more difficult for first-time buyers who rely on financing to compete.
The reasons why people purchased homes in 2024 provide further context to these trends. The desire to own a home of their own was the primary motivator for 22% of all buyers, and this figure jumped to 64% for first-time buyers. Other significant reasons included the desire for a larger home (16%), a better neighborhood (15%), and a change in family situation (11%). These motivations highlight the enduring appeal of homeownership and the various life events that drive people to purchase their first home.
| Reason for Purchase | Percentage of Buyers |
|---|---|
| Desire to own a home of their own | 22% |
| Desire for a larger home | 16% |
| Desire for a better neighborhood | 15% |
| Change in family situation | 11% |
| Job relocation or move | 9% |
| Desire for a different type of home | 8% |
| Retirement | 6% |
| Other | 13% |
Analyzing the reasons behind the decrease in the percentage of first-time homebuyers in 2024 reveals a complex interplay of factors. While affordability challenges, such as rising home prices and interest rates, certainly play a role, changing attitudes towards homeownership might also be a contributing factor. The increasing median age of first-time buyers suggests that younger generations might be delaying homeownership due to financial constraints or shifting priorities.
Demographic Breakdown of First-Time Homebuyers
Examining the demographic characteristics of first-time homebuyers provides further insights into this market segment. In 2022, most first-time homebuyers were white (81%), followed by Hispanic buyers and Black/African American buyers (both 7%). Those identifying as Asian or Pacific Islander made up 6% of first-time homebuyers, while the remaining 6% identified as another race. In terms of marital status, most first-time buyers in 2022 (50%) were married couples, although this figure is significantly lower than the 75% observed in 19854. Single women represented 19% of first-time buyers, followed by unmarried couples at 18%. The average household size among first-time homebuyers in 2021 was 2.66, higher than among non-moving owners. This suggests that first-time buyers often include families or individuals forming new households.
Forecasts and Predictions
Forecasting the future of first-time homeownership is challenging due to the complex interplay of economic, demographic, and social factors. However, some experts predict that the percentage of first-time homebuyers may remain relatively stable or even decline slightly in the coming years due to persistent affordability challenges and evolving attitudes towards homeownership. One prediction suggests that the housing market might decline in 2024, potentially impacting first-time homebuyers. Furthermore, the emergence of Gen Z as a significant segment of first-time homebuyers could shape future market trends. This generation, known for its tech-savviness and preference for sustainable living, might drive demand for homes with smart features and energy-efficient designs. Understanding the preferences and needs of Gen Z buyers will be crucial for real estate professionals and builders in the coming years.
Conclusion
The percentage of first-time homebuyers in the US real estate market has experienced fluctuations over the past five years, driven by a combination of economic conditions, housing market dynamics, and demographic shifts. While the desire for homeownership remains strong, affordability challenges, changing attitudes, and the increasing median age of first-time buyers present significant hurdles.
These trends have several implications for the real estate industry. Real estate professionals need to adapt their strategies to cater to the evolving needs and financial constraints of first-time buyers. Policymakers should consider initiatives that promote affordability and access to homeownership, particularly for younger generations and diverse communities.
Looking ahead, the future of first-time homeownership will depend on various factors, including economic stability, housing market trends, and the evolving preferences of homebuyers. Monitoring these factors and understanding their potential impact will be crucial for navigating the dynamic landscape of the real estate market.
Recommendations:
- For Real Estate Professionals: Focus on educating first-time buyers about available resources and financing options. Develop marketing strategies that target specific demographic groups, such as Gen Z and millennials.
- For Investors: Consider investing in affordable housing options and properties that appeal to first-time buyers, such as starter homes and condominiums.
- For Policymakers: Explore policies that promote affordable housing development and provide financial assistance to first-time homebuyers.