First-time buyers still face affordability challenges in today’s market with home prices elevated and mortgage rates climbing, but if they can surmount those challenges, they now have less competition and more options to choose from, the report suggested.
First-time buyers dwindled during the pandemic as they lost out on homes to older, repeat homebuyers who could tap into their home equity and cash stores in order to submit better offers, according to Zillow’s research. Younger buyers were most likely to lose out to all-cash buyers at least on one occasion, with 45 percent of Gen Z and 38 percent of millennials losing out to cash offers compared to 30 percent of all buyers, according to a Zillow survey.
“First-time buyers now appear to be making relative gains as high mortgage interest rates disproportionately encourage current homeowners to stay put,” Zillow population scientist Manny Garcia said in a statement. “The flow of homes into the market is slowing, suggesting homeowners are likely comparing their current low mortgage rate to today’s rates and deciding not to move. While rising mortgage rates are hurting affordability for all buyers, first-time buyers may be less deterred by higher rates because they’re comparing a monthly mortgage payment to what they’re paying in rent.”
Now, buyers in the market overall are declining, which means first-time buyers are gaining more of an advantage. Newly pending home sales were down 29 percent year over year in August, meaning there were fewer buyers active in the market.
Meanwhile, home values are up 14.1 percent from October 2021, despite declining month over month during the last two months. That adds up to a typical monthly mortgage payment that’s 60 percent higher than it was the same time last year.
With listings staying on the market longer, first-time buyers also have more time to consider their options. Listing stayed on the market twice as long in August 2022 (16 days) than they did in June 2022 (8 days). And with more sellers dropping their prices, first-time buyers also have an opportunity to negotiate a more favorable price. About 28 percent of listings saw a price cut in August, Zillow’s most recent market report stated.
Article BY LILLIAN DICKERSON