Who Is Nonetheless on First? An Replace of Traits of First-Time Homebuyers

Donghoon Lee and Joseph Tracy

Following the COVID-19 well being disaster, dwelling costs and mortgage charges rose sharply. This created issues that first-time homebuyers (FTBs) could be deprived and would lose floor. Earlier this yr, we documented that the share of buy mortgages by FTBs, in addition to their share of dwelling purchases, have truly elevated barely over the previous couple of years. It seems that FTBs are holding their very own on this difficult housing market. This raises the query of whether or not the traits of FTBs have modified. In a 2019 publish, we described the traits of those consumers over the interval from 2000 to 2016. On this publish, we offer an replace by 2024.

Mortgage Measurement

To transition from renting to proudly owning, a family usually must entry financing to help with the acquisition. The chart under exhibits the common origination mortgage balances for FTBs and repeat consumers over time. In annually, there’s a constructive hole between these balances, with repeat consumers taking out bigger mortgages. In 2016, this hole was $59,725. By 2019 it had fallen to $48,593, however on the heels of the well being disaster it elevated to $70,820 in 2022, subsequently easing to $64,760 by 2024. This widening of the distinction in common origination mortgage balances was pushed by a rise in comparatively giant mortgages taken out by repeat consumers. In distinction to the common steadiness distinction, the distinction within the median origination mortgage steadiness was solely $36,750 in 2022 and declined to $29,653 in 2024.

Credit score Rating

The mortgage charge {that a} family pays is determined by the common mortgage charge on the time in addition to the credit score rating of the family. As anticipated, the common credit score rating for repeat consumers exceeds that for FTBs. In 2016, repeat consumers had a median credit score rating of 750, whereas FTBs had a median rating of 714. Each common scores moved up modestly by 2019, to 758 and 718, respectively. Through the COVID-19 disaster from 2020 to 2022, the common credit score scores for each teams of households moved increased, to 767 and 729, respectively. This upward development continued over the subsequent two years in order that in 2024 the common credit score scores have been 775 and 734, respectively. Over the twenty-four years lined by the information, common credit score scores for repeat consumers rose by 71 factors and for FTBs by 64 factors.

Age

A pure query is whether or not FTBs have needed to delay their transition to proudly owning as a result of rise in dwelling costs and mortgage charges. In our 2019 publish, we confirmed that the common (median) age of FTBs in 2000 was 37.9 (35) years and that by 2016 it had declined to 35.4 (32) years. By 2019, the common (median) age of FTBs had edged upward to 36.4 (33) years, as proven under. There was little change over the subsequent 5 years, as the common (median) in 2024 was 36.3 (33) years. And so, regardless of the monetary challenges in transitioning from renting to proudly owning, over the previous decade households have managed the transition at basically the identical common age.

Earnings

Our knowledge doesn’t present borrower-level revenue. Nevertheless, we do know the zip code the place the house purchaser resides. This info permits us to take a look at the common adjusted gross revenue of the zip code utilizing the 2022 IRS tax statistics and to see how this can be altering over time for FTBs and repeat consumers. Observe that every zip code is matched to the common revenue of 2022 for all years, in order that any motion over time represents the relative neighborhood revenue place of the house purchaser, and never the adjustments in precise zip code revenue over time.

Because the chart under exhibits, common zip code revenue declined for each forms of consumers in the course of the housing increase of the early 2000s. Following the housing crash, these incomes elevated for each forms of consumers, peaking in 2012 for repeat consumers and two years later for FTBs. For repeat consumers, common zip code incomes subsequently trended decrease till 2019 after which elevated sharply over 2020 and 2021. For FTBs, the change in common zip code incomes from 2014 to 2022 was modest, after which from 2022 to 2023 it declined by greater than $5,800. This decline might mirror FTBs switching their focus to lower-income neighborhoods as home costs and mortgage charges moved increased.

Summing Up

First-time homebuyers have been extra resilient than many feared within the tight housing market of the previous few years. As we documented earlier and above, they’ve managed to take care of their general share of purchases with out having to delay the transition to homeownership. The continued enchancment in FTBs’ credit score scores has helped these consumers keep their entry to mortgage credit score. One technique utilized by FTBs on this troublesome market might have been to focus their home search in lower-income zip codes.

Donghoon Lee is an financial analysis advisor in Shopper Habits Research within the Federal Reserve Financial institution of New York’s Analysis and Statistics Group.

Joseph Tracy is a Distinguished Fellow at Purdue’s Daniels College of Enterprise and a nonresident senior scholar on the American Enterprise Institute.

 
@article{DonghoonLeeandJosephTracy2025,
    creator={Donghoon Lee and Joseph Tracy},
    title={Who Is Nonetheless on First? An Replace of Traits of First‑Time Homebuyers},
    journal={Liberty Avenue Economics},
    be aware={Liberty Avenue Economics Weblog},
    quantity={August 11},
    yr={2025},
    url={https://libertystreeteconomics.newyorkfed.org/2025/08/who-is-still-on-first-an-update-of-characteristics-of-first-time-homebuyers/}
}