First-Time Buyers Were the Market Wallflowers in 2015, Survey Shows

First-time home buyers have been fading from the market for three years in a row, and their participation is at its lowest point in three decades. These days, if you want to buy a house, it’s best if you have one already.

That’s according to the 2015 Profile of Home Buyers and Sellers from the National Association of Realtors^®, which was released on Thursday. The 128-question survey measures the preferences, motivations, demographics, experiences, and hopes and dreams of 6,406 recent buyers and sellers.

We get what’s happening: Home prices keep going up. Credit is tighter. Homeownership is at historic lows. It’s a whole heck of a lot harder to gather the capital to buy a home if you don’t have one to sell. Fifty-three percent of repeat buyers used the proceeds from the sale of their primary residence as the major source of their down payment, up from 47% last year and 40% in 2012.

“The overall strengthening pace of home sales over the past year was driven more by repeat buyers with dual incomes,” NAR reported. Historically, 40% of buyers were first-timers. This year, just 32% were newbies; that’s essentially the same as last year’s share of 33%. Fewer single women were buying homes on their own, and the largest group of buyers were married couples.

The challenges facing first-time buyers, especially for the younger set (millennials make up as much as 70% of the first-time buyers market), are affordable inventory, lack of savings for a down payment, and access to credit, combined with student debt, said Jonathan Smoke, chief economist of realtor.com®.

“First-time buyers reported that debt (all forms) delayed saving for a down payment for a median of three years, and among the 25%  who said saving was the most difficult task, a majority (58%) said student loans delayed saving,” said NAR’s chief economist, Lawrence Yun. “With a median amount of student loan debt for all buyers at $25,000, it’s likely some younger households with even higher levels of debt can’t save for an adequate down payment or have decided to delay buying until their debt is at more comfortable levels.”

You’d think the recovering economy and the still-low mortgage rates ought to help some. But rental prices are going up steadily, just as home prices are, making it harder to save.

Here’s what the typical person who could manage to land a first-time home looked like: The median age was 31, the median income was $69,400, and the typical home purchased was 1,620 square feet and cost $170,000. At least the buyer is getting more bang for the buck: the average first-time home square footage was 1,570 in 2014.

A typical repeat buyer was 53 and earned $98,700. The typical home was 2,020 square feet (many repeat buyers cited a desire for a larger home as the reason to move) and cost $246,400.

The stats about financing weren’t surprising. Repeat buyers have larger down payments. Some 85% of buyers used financing for their  purchase. About a quarter of first-timers used a gift or tapped into stocks or a 401(k) for help.

One thing that poses some potential problems: Everybody still wants a single-family home. They represented 83% of purchased homes. But to alleviate the housing crisis and buoy inventory, builders are going to have to focus on multifamily homes. And those just aren’t what buyers want.

There is some good news to be culled from the survey, at least for Realtors®. Some 90% of survey respondents worked with an agent; there were fewer for-sale-by-owner transactions than at any time since NAR started measuring in 1981.

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