Data from Zillow’s 2022 Consumer Housing Trends Report indicated first-time buyers have made up nearly half (45 percent) of the homebuying market this year. This is an increase from last year (37 percent), and a return to pre-pandemic norms.
This rebound in first-time buyers may be attributed to a cooling market which is seeing less competition to buy homes and declining home prices.
Zillow’s reports have shown the share of first-time buyers plummeted during the pandemic, as first-time shoppers lost out to older, repeat buyers who were able to tap the equity in their existing homes and use cash to make stronger offers.
A Zillow survey done in June found younger buyers were more likely to report losing to an all-cash buyer at least once, as was the case for 45 percent of Gen Z and 38 percent of millennial buyers, compared with 30 percent of all buyers.
“First-time buyers now appear to be making relative gains as high mortgage interest rates disproportionately encourage current homeowners to stay put,” said Manny Garcia, a Zillow population scientist. “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.”
Recent Zillow research from August found that those affordability challenges have driven up demand for the lowest-priced homes in each market. While there are fewer buyers overall, first-time buyers may find more competition for starter homes.